Financial services provider Allianz has published the twelfth edition of its Global Wealth Report, which puts the asset and debt situation of households in almost 60 countries under the microscope – including South Africa.
The data shows that 2020 was a year of extreme contrasts for personal finances, as Covid-19 destroyed millions of lives and livelihoods and the world economy plunged into its deepest recession since World War II.
Consequently, monetary and fiscal policy mobilised unimagined sums to support the economy, markets and people. The data shows that these initiatives were largely successful, stabilised incomes, and stock markets recovered quickly, Allianz said.
“With this tailwind, households’ wealth weathered the Covid-19 crisis: Global gross financial assets increased by 9.7% in 2020, reaching the magic €200 trillion mark for the first time. Savings were the main driver: As lockdowns drastically reduced consumption opportunities, the global phenomenon of ‘forced savings’ was born.”
Inflows into bank deposits – the default option of forced savings, simply leaving unspent income in the bank account – almost tripled (+187%). Bank deposits accounted for half or more of fresh savings in all markets considered.
As a result, for the first time, bank deposits globally grew at a double-digit rate of 11.9%; the previous peak growth was 8% in the financial crisis year of 2008.
While the asset class securities – buoyed by the strong stock markets – grew by 10.9%, insurance and pension fund assets showed much weaker development, rising by 6.3%.
The South African government did not provide support measures to the same level as European countries, however, it retained its 38th place in the ranking of the wealthiest countries with net financial assets per capita of €6,400 (R110,587), according to the 2021 edition of the report.
This put it ahead of other BRICS nations, Russia (42) and Brazil (43), but below China (34).
The gross financial assets of South African households rose by 5% in 2020, driven by bank deposits which climbed 11.3%, the fastest increase in six years.
“Insurance and pension fund assets, on the other hand, which are by far the most popular asset class in South Africa, accounting for more than half of all financial assets, grew by only 2.3%, one of the shallowest increases in recent years,” Allianz said.
“In fact, since the great financial crisis, only 2018 saw even weaker growth, with a decline of 3.4%. Securities showed a solid performance, increasing by 6.1%, on par with 2019.” Growth in liabilities slowed to 4.3%, against an average increase of almost 6% in the previous three years.
As economic output contracted in 2020, the debt ratio (liabilities in % of GDP) jumped to 48%, a level well above other emerging regions such as Latin America (32%) or Eastern Europe (26%) – but well below Asia (excluding Japan) where the average debt ratio stands at 61%, the insurance and asset management specialist said.
Despite a subdued start, continued bottlenecks in world trade, and new virus variants forcing new restrictions, global GDP will grow strongly in 2021, powered by the vaccination campaign, which allows economies to reopen and (partially) return to normality, Allianz said.
Loose monetary policies and generous fiscal support remain in place, it said, adding that bar any significant stock market corrections, 2021 should turn out to be another good year for savers globally.
“The head numbers are very impressive,” said Ludovic Subran, chief economist of Allianz. “But we should dig a little deeper. Most households did not really save but simply put their money aside. All this idle money on bank accounts is a wasted opportunity.
“Instead, households should invest in their retirement and the green transition, enabling societies to master the paramount challenges we face, climate and demographic change. My fear is that if households start eventually to dishoard, money will end up in revenge consumption and will only fuel inflation. We urgently need a new savings culture.”