Global household financial assets increased by 7.6% in 2023, fully covering the previous year’s losses, according to the findings of the Allianz Global Wealth Report 2024, which puts under the microscope the prevailing situation in household assets and debt in almost 60 countries.
Overall, total financial assets amounted to 239 billion. euros at the end of 2023. Growth across the three main asset classes was quite uneven. Bonds and shares (11%) and insurance/pensions (6.2%) benefited from the stock market boom and higher interest rates and grew faster than average over the last decade.
On the contrarybank deposit growth slowed to 4.6% after years of expansion during the pandemic, registering one of the lowest increases in the last 20 years.
The recovery in 2023 was broad. Specifically, only two countries, New Zealand and Thailand, recorded negative growth rates. Furthermore, growth was relatively stable across all regions, particularly in Asia and North America, where both grew by more than 8% – with the US (8.6%) recording even stronger growth than China. (8.2%).
As a result, emerging economies’ growth advantage over advanced economies narrowed again significantly, to just 2 percentage points last year.
Over the last six of the seven years, emerging economies have largely lost their growth lead. “The comparatively weaker growth of the poorest countries reflects the new reality of a fragmented world”, said Ludovic Subran, chief economist at Allianz.
“In 2017, the year the trade dispute between the US and China began, the poorest countries still had a growth advantage of 10 percentage points. or even more than the richest countries. We will all pay the price of disconnection, but emerging economies will be the ones that will be most affected. A less connected world is a more unequal world.”
There is no space for bank deposits
In 2023, savings decreased by 19.3%, reaching 3 billion. euro. This decrease is almost entirely due to bank deposits. In total, banks around the world received just 19 billion euros, a drop of 97.7%. The main culprit: US families, who liquidated deposits worth 650 billion euros. The other two asset classes, on the other hand, remained popular among savers. Bond inflows increased again by 10%. However, there has been a notable shift in preferences for this asset class: while shares were sold in many markets, savers made significant gains in bonds, thanks to the change in interest rates. And insurance/pensions proved relatively resilient, with the decline in new savings globally reaching just 4.9%.
Expected retention
Although financial assets were not affected by the change in the interest rate, the impact of household balance sheet liabilities was evident in 2023. Private debt growth slowed further, reaching 4.1% globally – the lowest level of growth in nine years.
In total, the global liabilities of families amounted to 57 billion. euros at the end of 2023. The decline in the rate of debt growth was recorded in almost all regions of the world in 2023. The trend was particularly strong in Western Europe and North America, where growth fell by more than half, to 1.1% and 2. .9%, respectively. As nominal growth in global economic activity remained high due to inflation, the global debt ratio (liabilities as a percentage of GDP) fell for the third consecutive year, dropping 1.5 percentage points to 65.4%. This is a drop of more than 3 percentage points compared to 20 years ago.
Relatively strong growth in assets and relatively weak growth in liabilities led to a significant increase in net financial assets of 8.8% (financial assets minus liabilities). Overall, global net financial assets totaled $182 billion. euros at the end of 2023, which showed an increase of almost 15 billion. euros compared to the previous year and, however, exceeding 4 billion. euros the previous record from 2021.
To tear down
Another sector that has been hit by rising interest rates is real estate.Who recorded the lowest growth of the last decade, with an increase of just 1.8%. In Western Europe, in fact, there was a drop of 2.2%. In the past, real estate market growth rates have lagged behind those of financial assets in most markets. In North America, for example, the annual difference has been more than 1 percentage point over the past 20 years, reflecting the fact that long-term capital gains in real estate are lower than in stocks.
The future of the real estate sector is expected to be even more challenging given the increasing impact of climate change on real estate assets. While natural disasters dominate the headlines, the costs of switching to green buildings (so-called transition risks) will have the biggest long-term impact. Housing Price Index projections under different climate scenarios through 2050 show declines of more than 20% in many markets. For all markets considered, property values could be 30 trillion lower. euro. “In the future, property prices will be determined equally by location and energy efficiency,” said Hazem Krichene, author of the report. “While natural risks are inevitable, transition risks are not: they are essentially the result of political decisions. Australia is leading the way. Ambitious climate policies can lead to significant reductions in energy consumption, minimizing the impact on property prices. Potential large losses in other markets are a call for efficient and effective climate policies. It’s not too late yet.”
Greece: Champion of Development in Western Europe.
Greek household financial assets increased by 7.4% in 2023, recording the highest growth rate in Western Europe (excluding Sweden). The main driver of this growth was debt securities and equity securities(portfolio share of 38%), which increased by 23.9%. This increase offset the decline in the largest asset category in Greek households’ portfolios, namely bank deposits (53% share), which decreased by 1.1%. Insurance/Pensions also showed significant growth of 6.8%, although its share in the portfolio remains small (6%).
The decrease in bank deposits is due change in savings behavior. Contrary to the global trend, new savings increased by 36%, reaching 5.4 billion euros. However, Greek savers withdrew €2.2 billion from bank deposits and directed them towards bonds and shares (7.6 billion euros), with bonds earning the most. Insurance/pensions received €0.5 billion in new savings. Overall, Greek savers reacted strongly to the change in interest rates.
Even in real terms, the picture does not change significantly: Adjusted for inflation, financial assets grew by 3.1% in 2023, the largest real increase in the region, even ahead of Sweden. Compared to pre-pandemic levels in 2019, the purchasing power of financial assets was 7.2% higher.
Liabilities fell 1.6%, bringing the debt ratio to 49% at the end of 2023that is, for the first time below the corresponding level of German families. Finally, net financial assets increased by a strong 12.4%. With net financial assets per capita of 21,140 euros, Greece rose one position in the ranking of the 20 richest countries, reaching 29th place.