Private banking sector in Middle East and Africa (MEA) is heading for an average annual growth of 6.6 per cent to hit $6.1 trillion by 2016.This compound annual growth rate, mostly driven by continued strong gross domestic product, or GDP, expansion in oil-rich countries, is faster than the 4.7 per cent surge in 2011, according to a new report by The Boston Consulting Group, or BCG.
In 2011, private financial wealth in Middle East and Africa grew to $4.5 trillion, up from $4.3 trillion in 2010, said the report, entitled The Battle to Regain Strength: Global Wealth 2012.
“We see this growth despite the fact that Middle Eastern and African stock markets suffered from the political instability caused by the uprisings across the Arab world in 2011,” said Dr Sven-Olaf Vathje, partner and managing director at BCG Middle East.
The region’s private wealth grew in 2011 driven by high savings rates and strong economic growth in commodity-rich countries such as Saudi Arabia and Qatar. The wealth held in bonds rose by 13.3 per cent, and cash and deposits grew by 5.1 per cent — only the amount of wealth held in equities decreased by 2.6 per cent, mostly driven by weak market performance, said Vathje.
The BCG study also estimates that between 2011 and 2016, private financial wealth in the region will grow by a compound annual growth rate of eight per cent for households worth more than $100 million, eight per cent for households worth between $1-$100 million and five per cent for households worth less than $1 million.
The report said the growth of global private wealth slowed down to 1.9 per cent in 2011 to a total of $122.8 trillion. The increase was considerably weaker than in the past two years. Global wealth grew by 9.6 per cent in 2009 and 6.8 per cent in 2010 but the eurozone crisis and a near default on US government debt in 2011 led to a sharp decline in global markets and private wealth during the year.
The report said that global private wealth growth in 2011 was driven primarily by rapidly developing emerging economies. While the total private wealth increased by 18.5 per cent in the BRIC countries in 2011, it declined by 0.9 per cent in North America, 0.4 per cent in Western Europe and two per cent in Japan.
“In 2011, Qatar, Kuwait, the UAE and Bahrain were among the top ten countries in the world by proportion of millionaire households,” Markus Massi, partner and managing director at BCG Middle East, added.
“Qatar stood at second place with 14.3 per cent millionaire households; Kuwait came in third (11.8 per cent); the UAE came in sixth (five per cent); and Bahrain stood at tenth place (3.2 per cent).”
Fuelled by new wealth in developing countries, such as China and India, the number of millionaires around the world also continued to grow by 175,000 in 2011.There were 12.6 million millionaire households worldwide by the end of 2011, 5.1 million of which were located in the United States.
Worldwide, more than 175,000 households crossed over to the millionaire club in 2011, taking the total to 12.6 million with China and India providing the boost.
The report attributes the shift to strong economic growth in Asia, while the United States grappled with a “near default on US government debt, combined with the euro debt crisis” and “a downgrade of the nation’s credit rating.”
BCG expects to see more of the mega-rich crop up across Asia in the near future. “Wealth in the region is expected to continue to grow at a double-digit rate reaching $40.1 trillion by the end of 2016, at which time it will have slightly overtaken Western and Eastern Europe combined,” it said.