For the first time since 2008, the world has faced a “significant” destruction of wealth: Allianz | Job Binary


In real terms, households could lose a tenth of their wealth

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Global financial assets have fallen more than two percent this year in the “first significant destruction” of wealth since the 2008 financial crisis, according to a new report by financial services giant Allianz SE.

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In real terms, households could lose a tenth of their wealth, according to Allianz’s Global Wealth Report 2022, which examines household assets and debt in nearly 60 countries.

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Allianz said that after the financial crisis there was a fairly rapid recovery, this time the recovery looks “very bleak”, at least in the medium term.

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It expects average nominal growth in financial assets to remain at 4.6 percent through 2025, less than half the 10.4 percent growth over the past three years.

“2022 is a turning point. The war in Ukraine has stifled the recovery period from COVID-19 and turned the world upside down: inflation is running high, energy and food are scarce, and monetary tightening is squeezing economies and markets. The well-being of farms feels a pinch,” the report said.

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In retrospect, 2021 looks like the “last hurray” for global wealth, whose stock market is driven by monetary policy, Allianz said.

In the three years ending in 2021, global financial assets will grow by $58 trillion to $225 trillion, which Allianz says is equivalent to adding two eurozones to the global financial pool.

North America’s wealth increased by 12.5 percent, followed by Eastern Europe (12.2 percent) and Japan (11.3 percent). Stock market momentum accounted for about two-thirds of this growth.

However, debt also increased during these difficult years. At the end of 2021, global household debt will be approximately US$50 trillion. The 7.6 percent increase from 2020 is the largest increase since 2006.

Allianz said the geographic distribution of debt has also changed since 2008, with its share declining in advanced markets and growing in emerging markets. Excluding Japan, Asia’s share of global debt has doubled over the past decade to 27.6 percent.

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“The sharp rise in debt at the start of a global recession is worrying,” Allianz said.

Over the past decade, household debt in emerging markets has grown at five times the rate of advanced economies.

Overall debt levels still appear manageable, but the report said, “given the strong structural headwinds these markets are facing, there is a real risk of a debt crisis.”

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