Singapore households wealthiest per capita in Asia: Allianz report

Oct 18, 2021

SINGAPORE has overtaken Japan to be the richest Asian economy in financial assets on per capita terms, according to a global wealth report by financial services provider Allianz.

Over a decade, the city state's net wealth per capita grew two-fold to hit 119,000 euros (S$186,000) in 2020, said the report published in October.

In 2010, Singapore was ranked second in Asia, while Japan's wealth growth was at a "standstill".

By 2020, Taiwan and Japan lagged Singapore, with net financial assets per capita at 118,000 euros and 100,000 euros, respectively.

Globally, Singapore takes the sixth spot, behind the United States (218,000 euros), Switzerland (212,000 euros), Denmark (149,000 euros), the Netherlands (129,000 euros), and Sweden (125,000 euros).

The report also highlighted growing discrepancy between wealth and economic growth. In 2020, global financial assets exceeded 300 per cent of global gross domestic product (GDP).

Measures taken to contain the pandemic, including lockdowns, brought public life to a standstill in large parts of the world. This resulted in a global phenomenon which the Allianz research team, led by chief economist Ludovic Subran, called "forced savings".

For the first time, bank deposits worldwide - the default option of "forced savings" - grew at a double-digit rate of 11.9 per cent. The previous peak growth in bank deposits was during the global financial crisis in 2008, at 8 per cent. Globally, securities as an asset class grew by 10.9 per cent, buoyed by strong stock markets, while insurance and pension fund assets showed a weaker development, rising by 6.3 per cent.

Fresh savings jumped by 78 per cent to a record 5.2 trillion euros in 2020, driven mainly by massive inflows into bank deposits, which accounted for at least half of fresh savings in all markets considered.

Gross financial assets across Asian households rose by 12.7 per cent in 2020, building on already strong growth of 9.8 per cent the previous year. All asset classes contributed to the rally in the region, with double-digit growth rates: bank deposits clocked growth of 12.3 per cent across the region, securities of 13.9 per cent and insurance and pension of 11.4 per cent.

In Singapore, life insurance and pension fund assets saw the strongest growth out of all asset classes, increasing by 10.5 per cent. Currency and deposits rose by 8.7 per cent and securities by 4.4 per cent.

Singapore, and Asia more generally, has traditionally had high rates of savings, so the "forced savings" phenomenon has less of an impact on a group that is already very prudent, the researchers said.

Data from the World Bank shows that Singapore saves about 54.6 per cent of its GDP. "Singapore also tends to be more financially literate, with higher rates of insurance penetration and greater awareness of the need for protection, compared to regional peers. This may account for why, amid a once-in-a-generation pandemic, there is a greater uptake for financial assets to safeguard long-term financial wellbeing," an Allianz spokesperson explained.

The weight of life insurance and pension funds in the average private household's portfolio in Singapore amounted to almost half of total financial assets by the end of 2020.

Overall, private households in Singapore saw gross financial assets grow by 8.9 per cent in 2020, as compared to 10.6 per cent in 2019. Some 35 per cent were held in currency and deposits, while 15 per cent in shares and securities.

Like the residents in many other Asian markets, Singapore's private households were also reluctant to take on new debt. The amount of outstanding loans shrank for the second year in a row, by 1.7 per cent after a 1.3 per cent fall in 2019.

Much of this growth in financial assets, however, is concentrated in the hands of the wealthy minority.

In 2020, the richest 10 per cent of the world's population - around 520 million people in the economies studied, with an average net financial assets of 250,000 euros - together own more than 84 per cent of total net financial assets.

Among them, the richest 1 per cent, with average net financial assets of more than 1.2 million euros, own almost 41 per cent.

In many economies, the national middle class's share of total national wealth has declined in recent years. The unweighted average share of the middle class in 2020 fell below the 40 per cent-mark for the first time - to 39 per cent.

In many economies in Asia, the lower and lower-middle income groups were the ones that bore the brunt of adverse economic effects of the pandemic. "Households in these income groups often had to use their savings or take out loans to support themselves. As a result, those who had just enough net savings in the previous year to be classified as part of the middle wealth group fell back into the lower wealth class," said the Allianz spokesperson.