Allianz Global Wealth Report 2021:  Saving from home

7 October 2021

Allianz Global Wealth Report 2021: Saving from home

Saved from the crisis: Global gross financial assets  increased by 9.7% in 2020, reaching the magic EUR 200 trillion mark for the first time.

Vaccinated: 2021 should turn out to be another good year for the savers, with overall growth in financial assets globally of around 7%.

Long Covid: The crisis is likely to reinforce wealth inequalities both between and within countries.

Bulgaria: No growth in financial assets.

Today, Allianz unveiled the twelfth edition of its “Global Wealth Report”, which puts the asset and debt situation of households in almost 60 countries under the microscope.

Saved from the crisis

2020 was the year of extreme contrasts. Covid-19 destroyed millions of lives and livelihoods and the world economy plunged into its deepest recession since World War II. At the same time, monetary and fiscal policy mobilized unimagined sums to support the economy, markets and people. With success: Incomes were stabilized and stock markets recovered quickly. With this tailwind, households’ wealth weathered the Covid-19 crisis: Global gross financial assets  increased by 9.7% in 2020, reaching the magic EUR 200 trillion mark for the first time.

Savings were the main driver: As lockdowns drastically reduced consumption opportunities, the global phenomenon of "forced savings" was born. Fresh savings jumped by 78% to EUR 5.2 trillion in 2020, an absolute record. Inflows into bank deposits – the default option of forced savings, simply leaving unspent income in the bank account – almost tripled (+187%). Bank deposits accounted for half or more of fresh savings in all markets considered. As a result, for the first time, bank deposits worldwide grew at a double-digit rate of 11.9%; the previous peak growth was 8% in the financial crisis year 2008. While the asset class securities – buoyed by the strong stock markets – grew by 10.9%, insurance and pension fund assets showed much weaker development, rising by 6.3%.

Vaccinated

Despite a subdued start, despite continued bottlenecks in world trade, and despite new virus variants forcing new restrictions, global GDP will grow strongly in 2021, powered by the vaccination campaign which allows economies to reopen and (partially) return to normality. Moreover, loose monetary policies and generous fiscal support remain in place. The upshot for savers around the world? Bar any major stock market corrections, 2021 should turn out to be another good year for them, with overall growth in financial assets globally of around 7%.

“The head numbers are very impressive”, said Ludovic Subran, chief economist of Allianz. “But we should dig a little deeper. Most households did not really save but simply put their money aside. All this idle money on bank accounts is a wasted opportunity. Instead, households should invest in their retirement and the green transition, enabling societies to master the paramount challenges we face, climate and demographic change. My fear is that if households start eventually to dishoard, money will end up in revenge consumption and will only fuel inflation. We urgently need a new ‘savings culture’.”

Long Covid

In 2020, financial assets in emerging markets (+13.9%) grew again faster than in advanced markets (+10.4%), returning to familiar patterns of growth after three years. As a result, the prosperity gap between rich and poor countries has also narrowed somewhat. The trend reversal that we diagnosed last year – the renewed drifting apart of the poorer and richer countries – thus appears to have been halted for the time being. However, it is (much) too early to sound the all-clear. While many developing countries performed surprisingly well in the first year of the pandemic, there are indications that the long-term consequences and challenges – from insufficient vaccination and reconfigured supply chains to the digital and green transformation – could primarily affect the poorer countries.

The same can be said with regard to national wealth distribution. While the national middle class has shrunk in recent years as their share of total national wealth has declined in many countries, for 2020 at least, the immense social transfers seem to have successfully counteracted a further drifting apart of the wealth classes. But this happy affair may not last when state support expires and the direct effects of the crisis – the loss of millions of jobs – will once again be felt. Moreover, the crisis led to a significant impairment in school education. Covid-19 is thus likely to further entrench social immobility. The gradual disappearance of the middle class has only temporarily stopped. 

“The pandemic is a much bigger challenge for poorer countries”, commented Patricia Pelayo Romero, co-author of the report. “Very likely, Covid-19 will continue to hold back economic development in this group of countries for much longer than in the advanced markets. But the real challenge comes afterwards: These countries will find themselves in a post-pandemic world that will make it increasingly difficult for them to play out their comparative advantages in a proven way, given the lasting changes in technologies, politics, and life styles. The gradual closing of the global prosperity gap – the defining development over the last decades – can no longer taken for granted.”

Bulgaria: No growth in financial assets

The gross financial assets of Bulgarian households rose by a meagre 0.1% in 2020, remaining basically flat; this was the weakest increase since 2000. With that, Bulgarian households were among the very few unhappy savers who saw no increase in 2020. Main culprit was the asset class of securities which accounts for 43% of all assets and declined by a whopping 9.3%; it was the first decline since 2012, driven in part by the fact that Bulgarian savers turned net sellers of securities in 2020. The other two asset classes, bank deposits as well as insurance and pension fund assets, showed strong growth, increasing by 10.0% and 10.8%, respectively. But in sharp contrast to most neighboring countries, there was no savings boom to speak of. On the contrary, fresh savings dropped close to zero (the increase in bank deposits is simply the flip side of selling securities). 

Growth in liabilities decelerated to 5.0%, the slowest increase in four years. As economic output contracted in 2020, the debt ratio (liabilities in % of GDP) jumped to 31%, which is still considerably below levels seen, say, in the Czech Republic (42%) or Slovakia (51%). Net financial assets, finally, shrank by 1.1%. With net financial assets per capita of 10,010 euros, Bulgaria remained in 35th place in the ranking of the richest countries (financial assets per capita, see table for the top20). With that, Bulgaria ranges midfield in the region, ranking, for example, below Slovenia (25), the Czech Republic (26), or Hungary (30), but ahead of Poland (37), Slovakia (38) or Rumania (40). Moreover, since 2000 Bulgaria climbed by seven rungs, underlining the successful catch-up process over the last decades. This contrast to many Western European countries such as Italy, France, Belgium, or Great Britain which dropped quite dramatically in the ranking since 2000. As a result, the top10 look differently today than in 2000: it has become more of a Scandinavian-Asian affair – but with the USA and Switzerland still reigning supreme.

table
The full report can be found here.