The sharp economic recessions caused by the pandemic last year did not hurt household wealth in countries including Singapore, contrary to common perceptions.
"Indeed, there is a hint that the countries facing the biggest economic challenges have achieved higher-than-average wealth gains," says Credit Suisse in its latest Global Wealth Report.
According to Credit Suisse, household wealth held up despite the record economic contraction because equity markets and housing prices did not tank.
"Most likely, it is testament to the success of government support programs and lower interest rates following central bank intervention," says Credit Suisse.
Credit Suisse notes that four countries: Belgium, Canada, Singapore and the UK suffered the most economically with an average contraction of 7.1%. Yet, they enjoyed unusually high wealth gains averaging 7.7% net of exchange rate considerations.
In short, the wealth gain exceeded the magnitude of the GDP loss.
However, Credit Suisse warns the evidence is not conclusive. The US, for one, enjoyed a 9.9% rise in wealth which was more than triple the size of the reduction in GDP.
"But even if it is not accepted that higher GDP losses are associated with higher wealth gains, there is compelling evidence that higher GDP losses have not suppressed wealth gains, which is surprising in itself," says Credit Suisse.
According to Credit Suisse’s estimates, in 2020, there were 270,000 millionaires in Singapore. This number is expected to rise 61.9% to around 437,000 millionaires in 2025.
Out of which, there were 1,361 ultra-high-net-worth adults with a net worth exceeding US$50 million in 2020, coming in 19th place globally. Total wealth in Singapore stood at US$1.6 trillion in 2020, up from US$1.5 trillion in 2019.
Globally, Singapore ranked 10th highest in mean wealth per adult, with US$332,995 in 2020, up 8.3% increase over 2019 and working out to a 3.9% annual growth since 2010.
"There is no denying actions taken by governments and central banks to organize massive income transfer programs to support the individuals and businesses most adversely affected by the pandemic, and by lowering interest rates, have successfully averted a full scale global crisis," says Nannette Hechler-Fayd’herbe, chief investment officer International Wealth Management and Global Head of Economics & Research at Credit Suisse.
See also: Singapore property sector on the cusp of a virtuous en-bloc cycle: Credit Suisse
However, these interventions have come at a great cost, warns Hechler-Fayd’herbe, pointing out that public debt relative to GDP has risen throughout the world by 20 percentage points or more in many countries.
"Generous payments from the public sector to households have meant that disposable household income has been relatively stable and has even risen in some countries. Coupled with restricted consumption, household saving has surged inflating household financial assets and lowering debts," she adds.
"The lowering of interest rates by central banks has probably had the greatest impact. It is a major reason why share prices and house prices have flourished, and these translate directly into our valuations of household wealth," says Hechler-Fayd’herbe.
According to Credit Suisse, other wealth reports do not include the value of owner-occupied homes and calculate only “investable assets.”
In contrast, the bank uses a comprehensive definition of net worth that encompasses both financial assets and non-financial assets together with debts.
Its estimates rely heavily on household balance sheets produced by national statistical agencies. Credit Suisse aims to include assets that people would recognize as part of their personal wealth: dwellings, land, savings, investments, as well as the market value of pension funds.
