Global private wealth surges ahead - Germany trails behind
Catching Up: A Snail's Pace for Germany's Wealth Growth in 2024
A recent study unearthed a stark contrast in the global wealth landscape of 2024, with Germany trailing behind, despite its substantial economic heft. Global private wealth soared by an accelerated 4.6 percent in 2024, surging past the $470 trillion mark, as revealed in the "Global Wealth Report" from UBS[1]. However, the old world's backbone, Europe, suffered a meager 0.4 percent increase, with North America leading the pack, leaping over 11 percent[1].
Switzerland and the US Rule the Roost
Switzerland, the traditional haven of wealth, held the top spot in the wealth ranking, with Swiss adults boasting an average wealth over $687,000[1]. The United States followed closely with $620,654 per adult, while Hong Kong came in third with approximately $601,000. With the world's third-largest economy, Germany ranked a disappointing 19th, with a mere $257,000 per adult—a significant gap from the UK and France[1].
Germany Struggles to Keep Pace
Germany's private wealth growth was, at best, moderately dynamic in 2024, expanding by less than 2.5 percent when adjusted for inflation[1]. The overwhelming majority of Germany's total private wealth stemmed from non-financial assets like land and real estate, with less than half tied to financial assets[1]. This disparity meant that Germans did not significantly benefit from robust stock markets.
Germans largely preferred the security of bank deposits over the potential volatility of stocks. By the end of 2024, private households' money assets surged to an astounding €9,050 billion, with over a third in cold, hard cash or sight deposits[2]. Lower-income households, in particular, flocked to these low-risk options.
UBS foretold that global wealth per adult would continue to swell over the next five years, with the U.S. and China expected to spearhead this growth.
However, the enrichment data sheds light on several interrelated factors contributing to Germany's sluggish wealth growth in 2024:
- Economic and policy uncertainty: Germany's cautious corporate and investor behavior stemmed from economic and policy uncertainty, such as trade tensions[3].
- High government expenditure ratio: A substantial government footprint, with a spending ratio of 49.5% of GDP in 2024, likely crowded out private sector investment and wealth creation opportunities[5].
- Slower consumer wealth growth despite wage increases: Although consumer spending saw some growth, it was not enough to significantly boost private wealth growth[5].
- Private market exposure risks: Elevated exposure to private markets could have dampened wealth growth due to regulators' warnings about this heightened exposure[2].
In essence, Germany's slower wealth growth in 2024 can be traced back to its modest economic growth, cautious investment environment, extensive government sector, and structural constraints in private wealth accumulation[4][5].
- To reverse Germany's sluggish wealth growth, engaging in comprehensive economic and social policy reforms is crucial, including addressing economic uncertainty, minimizing high government expenditure, fostering private sector investment, and diversifying personal-finance strategies to consider investing and wealth-management techniques that cater to a more robust stock market.
- In pursuit of sustaining personal-finance progress, German citizens might want to explore alternative financial avenues, such as investing in a range of assets or seeking professional advice for wealth-management, to create opportunities for wealth accumulation that transcend the security of bank deposits.
