Allianz chief economist Michael Heise: increasing uncertainty takes its toll

Report shows the first ever simultaneous decline of financial assets in industrial and emerging countries.

The annual Allianz Global Wealth Report, which looks at the asset and debt situation of households in more than 50 countries, announced on Wednesday 18 September that in 2018, financial assets in industrial and emerging countries declined simultaneously for the first time. 

This was because of the escalating trade conflict between the US and China, the endless “Brexit saga”, increasing geopolitical tensions, the tightening of monetary conditions and the normalisation of monetary policy. 

Global equity prices fell by around 12 percent in 2018, having a direct impact on asset growth. Global gross financial assets of private households fell by 0.1 percent and remained more or less flat at €172.5 trillion.

Allianz chief economist Michael Heise said that the increasing uncertainty takes its toll. 

“The dismantling of the rule-based global economic order is poisonous for wealth accumulation. The numbers for asset growth also make it evident: Trade is no zero-sum game. Either all are on the winning side – as in the past – or on the losing side – as happened last year. Aggressive protectionism knows no winners.”

According to the report the gross financial assets of South African households declined by 3.2 percent in 2018, marking the first decline since the financial crisis in 2008. The decline was triggered by a sharp fall in insurance and pensions (-2 percent) and other assets (-9.5 percent). 

Bank deposits, on the other hand, were growing relatively healthily at a rate of 7.8 percent, but only accounting 15 percent of all financial assets. 

Growth in liabilities accelerated to 6.9 percent, the fastest increase in six years. As a result, the debt ratio of households increased to 44.3 percent at the end of the year, well above the average of emerging markets of 40.3 percent – but still ten percent below the pre-crisis peak. 

As result of declining assets and rising liabilities, net financial assets in South Africa fell by 6.4 percent in 2018. With net financial assets per capita of €6,470, South Africa remained at the 38th place in the ranking of the richest countries.

For the first time in over a decade, the global wealth middle class did not grow: At the end of 2018, roughly 1,040 million people (among them almost 6 million South Africans) belonged to the global wealth middle class – which is more or less the same number of people as one year before.