Latin American Household Incomes Suffered the Most During the Pandemic
Household incomes increased by 7.4% worldwide, contrasting with what happens in the wider economy. Economically speaking, Latin American households suffered the most in 2020. But countries hit the most by the pandemic have not necessarily decreased household incomes, thanks to public money.
The Global wealth report released by Credit Suisse in June 2021 estimates that the worldwide total household wealth grew by 7.4% in 2020. The average wealth was $79,955 US per adult in 2020, a 6% increase (+2,7% without the exchange rate fluctuations) to reach the highest value recorded. The report notes that “the contrast between what has happened to household wealth and what is happening in the wider economy” can never have been more striking.
Total wealth in India and Latin America suffered losses in 2020, while Africa’s wealth remained stable overall. India lost 4.1% of its wealth, adjusted to -2.1% at fixed exchange rates, while Latin America’s total wealth dropped by 11.4%. In some countries, household income has even increased during the period. Household wealth increased the most in North America, Europe, and China.
Surprisingly, Gross Domestic Product losses didn’t necessarily suppress wealth gains. Wealth may have even improved despite a decrease of the GDP.
Household incomes may have increased despite economic downturn
Usually, it is expected that the household wealth grows only a little faster than GDP growth. However, even if Belgium, Canada, Singapore and the United Kingdom experienced an average GDP loss of 7.1%, they yet gained 7.7% in wealth, adjusted from exchange rate considerations. The increase of household wealth in those countries exceeded the GDP decrease.
In countries where income was massively supported with emergency measures, the reduction in consumption opportunities led to increased savings. In the European Union, where household wealth grew, household net saving rates rose from 5.8% of disposable income in 2019 to 12.57% in 2020.
Wealth per adult increased the most in Switzerland, Australia and Sweden, with more than $50,000 US gain in a year, although the currency exchange rates explains most of the increases. Overall, losses were more modest. Hong Kong, down $26,419 US per person, suffered the most. Hong Kong is still the country with the third largest mean wealth per adult behind Switzerland and the United States.
Public money came to support the household wealth, which is one of the reasons of the resilience of households, leading to increased debt of states. The financial market and housing prices have also been doing well in countries severely hit economically, whose reasons lie in government financial supports and low interest rates, the report suggests.
The repercussions of the COVID-19 pandemic led to widespread rises in wealth inequality. Wealth differences between adults widened in 2020. The number of millionaires in the world expanded by 5.2 million, or 9%, to reach 56.1 million. For instance, Portugal has 19,430 more millionaires, 17% more than in 2019, while its GDP shrank by 7.6%. And in the meantime, 400,000 Portuguese fell below the poverty line because of the pandemic.
In 2020, 55% of the global population shared only 1.3% of the global wealth. Low and middle-income countries account for 42% of the global growth, but gather only 33% of the current wealth.
- The Global wealth report 2021, Credit Suisse, June 2021, Free access
- Crise gerada pela pandemia atirou 400 mil portugueses para a pobreza, Católica Lisboa, June 2021, Free access