Even though the pandemic outbreak has caused a major economic crisis which led to a decline in individual wealth, the household income largely held up and even increased in China and India, according to a report.
Sometimes referred to as household affluence, household wealth is a term used to describe the net worth of a specific household, or the average net worth of households within a defined geographic area.
The Switzerland based investment bank Credit Suisse Group’s 2020 Global Wealth Report released recently states that the steps taken by government and central-bank to diminish the COVID-19 impact supported the global wealth to rebound from a fall in the first quarter of the year adding $1 trillion by June 2020, after 2019 ended at $399.2 trillion.
The global impact on wealth distribution within countries is relatively small given the considerable pandemic related GDP losses and there is no firm proof that the pandemic has systematically favored higher-wealth over lower-wealth groups or vice versa.
Experts anticipate that the global wealth creation will bounce back by next year as the economy recovers but North America will be an exceptional case. The report says that the US economy has become unstable due to the high prevalence of COVID-19. The region’s wealth per adult is estimated to fall 5 percent this year.
In the first half of 2020, only China and India saw gains in household wealth with a 4.4 percent and 1.6 percent growth respectively whereas Latin America suffered the most, with a 13 percent decline, as currency devaluations put out losses in GDP.
Wealth per adult has plunged an average of $76,984 from $77,309 at the beginning of the year, the report found. Switzerland, the Netherlands, Taipei and Hong Kong saw gains, while Norway and the UK posted the biggest falls.
“Given the damage inflicted by COVID-19 on the global economy, it seems remarkable that household wealth has emerged relatively unscathed. Initially, the impact of the pandemic was felt mainly via the sharp worldwide decline in equity prices. When the commitment of governments and central banks became apparent, equity prices began to rise.”
Impact on Millionaires
The number of millionaires increased to 51.9 million last year, but 2020 has witnessed slight changes worldwide. As per the report, at the beginning of this year there were 175,690 ultra-high net worth (UHNW) adults in the world with more than $50 million worth net assets and 120 of these members were excluded from the list in the first half of 2020. In the US, which has the most people in the top 1 percent wealth group and 39 percent of the world’s millionaires, the inequality gap has narrowed, according to the report.
Amazon’s Jeff Bezos, the world’s richest person has accumulated more than $73 billion this year, taking his fortune to $188 billion. Facebook’s Mark Zuckerberg has gained $27 billion which gives him more than $105 billion in total and with the rise of online meetings, Zoom Video Communications Eric Yuan’s net worth has increased by $22 billion.
Overall, the world’s 500 richest people have accumulated $970 billion to their wealth this year and the top 1 percent of the world, with more than $1million each, hold 43 percent of global wealth, the report found.
Women and millennials highly affected
Female workers were severely affected by the pandemic, mainly because of their high representation in businesses and industries like restaurants, hotels, personal services and retail that faced a huge decline during the period.
The millennials, who are aged between 20-40 are also suffering from the repercussions of the pandemic. The post-COVID-19 generation will also have to deal with reduced economic activity and globalization, as well as discouraged travel.
Even though COVID-19 reminds the danger of exogenous shocks to the global economy, unlike the financial crisis of 2007-08, there is a reason for optimism this time around, as the global financial sector is much healthier than it was then says Nannette Hechler-Fayd’herbe, Credit Suisse’s chief investment officer for international wealth management and global head of the economics and research unit.