Global wealth is slowing? UBS economist explains why


A recent UBS Global Wealth report reveals that global wealth increased by 4.2% in 2023. However, the report also indicates a deceleration in the rate at which individuals are accumulating wealth. To shed light on this trend, UBS Global Wealth Management chief economist Paul Donovan offers his analysis.

Donovan explains that the primary factor behind this slowdown is the natural progression of economic development. As populations transition from low or middle-income status to higher income brackets, “naturally the pace of wealth accumulation is likely to slow,” he notes. This phenomenon is particularly evident in more mature economies like those in European nations and the United States.

Donovan emphasizes the crucial role of demographics in wealth creation. “Slowing wealth is tending to be more likely where you have slowing population growth or negative population growth,” he explains, adding: “You’ve got to bear in mind wealth is something which is generated by people in your country.”

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This post was written by Angel Smith

Video Transcript

Everyone.

Global wealth is increasing, but by how much?

U BS is out with their annual global wealth report, and while wealth is increasing worldwide, its pace is slowing down dramatically.

As the report points out, in the first decade of the millennium, over half of the markets in the sample saw their wealth grow in the double digits when measured US dollars.

Since then, not a single one comes close to 10%.

For more on this, let’s bring in Paul Donovan U BS Global Wealth Management Chief Economist Paul Great to speak with you.

And thanks for taking some time here with us.

What do you think is at play more largely with some of the wealth growth dynamics here.

And is there one major catalyst for the wealth growth that we have seen?

So I think that the major catalyst behind the slowdown is simply that as we become wealthier, as you know, economies move out of low income status towards middle income status.

Naturally, the pace of wealth accumulation is likely to slow.

If you’re a very low income economy.

To start off with you’re getting rapid wealth increases is actually quite easy.

But if you’re a a relatively mature economy, like say, uh, Europe or or the United States.

You’re not gonna get that double judic growth coming through.

Also, it’s worthwhile pointing out, You know, we we’ve had the aftermath of the global financial crisis.

We’ve had a global pandemic you that would naturally cause some slowdown in global wealth.

Um uh, growth in the second decade of this millennium, we’re we’re certainly looking across some some shifting dynamics of where there is major purchasing or what industries are seeing booms.

Right now, it’s hard not to think about generative a I and some of the chip manufacturers that are really benefiting.

So how has that also kind of passed through to certain regions of the world and their own kind of wealth growth?

So this is something that is actually very, very important.

It’s one of the reasons why trying to get a handle on what’s happening with wealth, which, of course, is what we’ve been trying to do for the last 15 years.

Why this is so important because when we get these periods of dramatic structural upheaval in the global economy, what we we call the Fourth Industrial Revolution what you will find is that certain individuals, certain companies suddenly get wealth unexpectedly get wealth.

You know, almost by accident, You you just happen to have had the right idea at the right time and boom off goes your wealth.

So when you see these sort of disruptions coming through, it’s very common that we get very specific wealth increases coming through, either because people have invested in the right companies at the right time.

Or they are entrepreneurs who have just happened to have the right idea at the right time.

Uh, and so with that in mind, where where are we seeing kind of the biggest slowdown right now?

Well, flowing wealth is, uh, tending to be more likely where you’ve got slowing population growth or negative population growth and where you are a relatively, uh, mature economy.

Overall, that’s where you’re more likely to be seeing a slowdown in growth.

We’ve got to bear in mind that, you know wealth is something which is generated by people.

If you’ve got fewer people in your country, then at the very least, the growth rate in your wealth is likely to be lower, and it could well, uh, turn negative so you you look for some of the older economies with with very rapidly ageing demographics.

That’s where wealth is more likely to be slow or or very occasionally negative.

So I guess as a follow up to that because millennials get blamed for everything and population growth could be another one of those things.

What kind of pass through effect would that have on wealth growth in the next decade?

Even if there wasn’t, you know, the family planning or the population growth that we’ve seen of decades past?

Well, I mean, whether we’re talking about GDP, which is an income measure or wealth, uh, which is sort of effectively an accumulation of past income, you will see a slowdown.

Um, but not necessarily, of course, in wealth per person or, for that matter, in GDP or income per person.

Uh, and so this is one of the interesting things about the the millennials, um that people say, Oh, you know, millennials are are gonna be, you know, worse off.

And they’re not as well off as their parents.

Millennials will be one of the richest generations we have ever, ever had in history, because what is going to happen is you have got still growing wealth.

Wealth has grown for 12 out of the last 15 years in the global economy, but you’ve got fewer people to divide that wealth up amongst.

So the millennial generation, because it’s a a smaller generation than Gen X, my generation or the boomer generation.

Because Millennials and Gen. Z are smaller generations, they will be sharing a larger pot of wealth amongst fewer people.

Paul Donovan love to hear it.

U BS Global Wealth Management Chief Economist Thanks so much for the time.

Paul, Great to see you.



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