More than 5 million people become millionaires despite pandemic

Global wealth accumulated by households rose by about US$28.7 trillion in 2020 as central banks flooded financial markets with cheap money. Photo / 123RF

Wealthiest benefit most from asset price inflation as the number of people worth at least $50 million rises almost a quarter.

The coronavirus pandemic has wreaked misery and economic damage around the world but it has also been a boon for the rich with an estimated 5.2 million people becoming dollar millionaires last year while the number of those worth at least US$50 million ($71 million) increased by almost a quarter.

A Credit Suisse report found that aggregate global wealth accumulated by households rose by about US$28.7 trillion ($40.8 trillion) in 2020 as central banks flooded financial markets with cheap money, inflating asset prices.

Higher equity and residential property valuations lifted aggregate household net worth — assets, including property, minus debts — to about US$418.3 trillion ($595.8 trillion). The increase was equivalent to a 4.1 per cent rise on a constant currency basis — only slightly below the annual average of the past two decades even as global economies struggled with the health crisis and lockdown restrictions.

"The contrast between what has happened to household wealth and what is happening in the wider economy can never have been more stark," the Credit Suisse report said. It found that the wealthiest benefited the most from a policy response that inflated assets, with the gap between rich and poor widening in most countries.

The combined wealth among individuals with a net worth of at least US$1 million ($1.4 million) had grown nearly fourfold since 2000 to US$191.6 trillion ($272.9 trillion), while their share of global wealth rose from about 35 per cent to 46 per cent.

An estimated 2.9 billion people — equivalent to 55 per cent of all adults — meanwhile had less than US$10,000 ($14,000) in net assets. "Wealth differences between adults widened in 2020 for the world as a whole and also in most countries," said the paper, co-authored by economists Anthony Shorrocks, James Davies and Rodrigo Lluberas.

The study estimated there were 56.1 million dollar millionaires globally at the end of 2020, up by 5.2 million from a year earlier. About a third of the new millionaires came from the US.

While about 90 per cent of millionaires had net worth of less than US$5 million ($7.1 million), an estimated 7 million had more than this sum. At the highest end, 215,030 had a net worth of more than US$50 million ($71 million) — up from the 173,620 recorded a year earlier.

"That would be a very high rise in any year, but it is particularly striking in a year experiencing social and economic turmoil," the authors wrote. "The nature of the policy response to the pandemic has of course been a major influence."

Millionaires remained uncommon in India, Indonesia and Russia, at about one in a thousand adults, and also relatively rare in China, at one in 200. This compared with 8 per cent of the population in the US and 15 per cent in Switzerland. Credit Suisse's methodology included housing wealth as well as investable assets.

Countries badly affected by coronavirus were among those that recorded the biggest expansion in household net worth. Gains were greatest in North America and Europe, where total wealth rose about 10 per cent, the study found.

Written by: Alistair Gray
© Financial Times