Surprising relief: Global financial assets of private households increased by 7.6% in 2023, more than making up for the losses of the previous year
No place for bank deposits: Fresh savings normalized after the pandemic-related boom years as savers gave banks the cold shoulder
Expected restraint: With interest rates rising, growth in private debt weakened further to 4.1% worldwide, the lowest growth in nine years
Asia: Debt outgrows financial assets in the long run
Malaysia: Powered by insurance/pensions
Kuala Lumpur, September 25, 2024 - Allianz unveiled the 15th edition of its “Global Wealth Report”, which puts the asset and debt situation of households in almost 60 countries under the microscope.
Surprising relief
2023 was marked by sharp monetary tightening. But economies proved resilient and markets even boomed. Against this backdrop, global financial assets of private households recorded strong growth: With an increase of 7.6%, the losses of the previous year (-3.5%) were more than made up for. Overall, total financial assets amounted to EUR 239 trillion at the end of 2023. Growth in the three major asset classes was quite uneven. Securities (11.0%) and insurance/pensions (6.2%) benefited from the stock market boom and higher rates and grew significantly faster than the average of the last ten years. In contrast, growth in bank deposits fell to 4.6% after the pandemic-related boom years, recording one of the lowest increases in the last 20 years.
The recovery in 2023 was broad-based. In fact, only two countries – New Zealand and Thailand – recorded negative growth rates. Moreover, growth was relatively uniform across all regions, not least in Asia and North America, which both grew by over 8% – with the USA (8.6%) growing even more strongly than China (8.2%). As a result, the growth advantage of the emerging economies over the advanced economies has shrunk significantly again, amounting to just 2pp last year; in six of the last seven years, emerging economies have largely lost their growth lead. “The comparatively weaker growth of poorer countries reflects the new reality of a fragmenting world.”, said Ludovic Subran, chief economist of Allianz. “Until 2017, the year in which the trade disputes between the USA and China broke out, poorer countries still had a growth advantage of 10 percentage points or more over richer countries.. We will all pay a price for decoupling but it is the emerging economies that will feel it most. A less connected world is a more unequal world.”
No place for bank deposits
In 2023, the normalization of fresh savings continued after the pandemic-related boom years of forced savings: They fell by 19.3% to EUR 3.0 trillion. This decline was almost exclusively attributable to bank deposits. On balance, banks worldwide only received EUR 19bn, a slump of 97.7%. The main culprit: US households who liquidated deposits worth EUR 650bn. The other two asset classes, on the other hand, remained popular with savers. Inflows into securities even increased once again by 10.0%. However, there was a notable change of favorites within this asset class: while shares were sold on balance in many markets, savers made strong gains in bonds, thanks to the turnaround in interest rates. And insurance/pensions proved to be relatively robust, with the decline in fresh savings worldwide amounting to just 4.9%.
Expected restraint
While financial assets shrugged off the interest rate turnaround, it had a clear impact on the liabilities side of private households' balance sheets in 2023: Growth in private debt weakened further to 4.1% worldwide, the lowest growth in nine years. Overall, the global liabilities of private households amounted to EUR 57trn at the end of 2023. The decline in debt growth was observed in almost all regions in 2023. It was particularly pronounced in Western Europe and North America, where growth more than halved to 1.1% and 2.9%, respectively. As nominal growth in global economic activity remained elevated by inflation, the global debt ratio (liabilities as a percentage of GDP) fell for the third year in a row, dropping by 1.5 pp to 65.4%. This was also more than 3 pp lower than 20 years ago.
Relatively strong growth in assets and relatively weak growth in liabilities led to a significant increase of 8.8% in global net financial assets (financial assets less liabilities). Overall, global net financial assets amounted to EUR 182trn at the end of 2023; this represents an increase of almost EUR 15trn compared to the previous year and is also EUR 4trn above the previous record value from 2021.
Asia: Debt outgrows financial assets in the long run
Financial assets of Asian households increased by 7.5% in 2023, reaching EUR 63.8 trillion, a quarter above the level in Europe. All asset classes contributed to this increase, which bank deposits (9.3%) being the main driver. Insurance/pensions proved resilient, advancing by 5.5%. Against the backdrop of booming equity markets worldwide, the growth in securities (5.9%) was rather disappointing, held back by the development in China (-0.8%).
Liabilities grew by 6.8%, well above the global average. However, for Asian standards it’s rather subdued growth: together with 2022 (6.2%), it’s the weakest growth in liabilities since the Global Financial Crisis. “Over the last two decades, liabilities have clearly outgrown financial assets in Asia”, said Michalea Grimm, co-author of the report. “The gap amounted on average to 1.5 pp per year. In most advanced markets, it’s the other way round. In fact, the debt ratio in Asia (62.8%) surpassed that of Europe (59.5%) in 2023 for the first time. The increasing indebtedness of private households in Asia is a growing concern.”
The picture changes only slightly in real terms: Adjusted for inflation, the increase in 2023 was 5.6%, thanks to relative low inflation rates in the region, not least in China. This is in stark contrast to many advanced economies, particular in Europe: Compared to the level of 2019, the purchasing power of financial assets was still 3.1% lower on the old continent at the end of 2023. In Asia, real financial assets increased by 26.3% compared to pre-pandemic level.
Net financial assets of Asian households advanced by a robust 7.8%. Average net financial assets per capita amounted to EUR 11,630 at the end of 2023, with a wide range from Singapore (EUR 171,930) to Indonesia (EUR 930). The table shows the ranking of the 20 richest countries.
Malaysia: Powered by insurance/pensions
With net financial assets of EUR 9,430 per capita, Malaysia ranks midfield in Asia and the world (see table). It clocked robust growth in 2023: Gross financial assets advanced by 5.8%, recovering from the setback in the two previous years. Main driver was the biggest asset class insurance/pensions (portfolio share of 42%), which increased by 9.8%, the fastest increase in five years. Bank deposits, too, grew solidly with 5.2%. Only the asset class securities lagged behind (0.3%); at least, after two years of shrinking, it returned to positive growth. In real terms the picture is less rosier. Adjusted for inflation, the increase in 2023 almost halved to 3.2%; moreover, real financial assets are only slightly above the level of 2020 (0.8%), albeit clearly above the pre-pandemic level (9.1%).
Growth in liabilities continued at pace (5.7%). As a result, the debt ratio remained at 81% at the end of 2023, one of the highest ratios in Asia. However, it’s still below the levels seen before the pandemic when the ratio hovered around 85%.
The interactive “Allianz Global Wealth Map” can be found here on our homepage: https://www.allianz.com/en/economic_research/research-data/interactive-wealth-map.html
You can find the study here on our homepage: https://www.allianz.com/en/economic_research.html
This content is provided by Allianz Malaysia Berhad.
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