MANAMA: As much as 68.8 per cent of Bahrain’s wealth was held by millionaires last year, and the number of millionaires in the country is expected to grow by 1.1pc annually over the coming years, shows a new report.
Findings of the 20th annual study of global wealth management conducted by Boston Consulting Group (BCG), also suggest Bahrain represented 1.1pc of the share of the personal wealth pool in 2019 in the Middle East and Africa, having grown by 4.4pc annually to $100 billion between 2014 and 2019.
According to the report titled ‘Global Wealth 2020: The Future of Wealth Management – A CEO Agenda,’ equities and investment funds represented the country’s largest onshore asset class, accounting for 52.7pc of total personal wealth in 2019, while life insurance and pensions are expected to grow the fastest at 5.7pc through 2024.
“Despite the current economic decline and precarious outlook globally for the coming years, estimates indicate Bahrain will still record sustainable growth across several areas within the wealth segment,” said BCG managing director and partner Mustafa Bosca.
In the report, BCG outlines three potential scenarios for post-Covid-19 growth: ‘quick rebound’, ‘slow recovery’, and ‘lasting damage’.
If the first scenario unfolds, there will be GDP drop in 2020, followed by a strong recovery in 2021 and pre-crisis GDP growth rates in the following years.
Looking at capital market performance in this case, there will be drop in the stock market in 2020, followed by quick rebound to pre-crisis levels in 2021 and stable returns from 2022 to 2024 comparable to historic growth.
A quick rebound will lead to global personal wealth rising at a compound annual growth rate (CAGR) of 4.5pc to $282 trillion by 2024.
On the other hand, the second scenario would mean a strong GDP drop in 2020, followed by slow recovery in 2021.
From 2022 to 2024, GDP growth is seen stable but slightly lower than pre-crisis levels.
The stock market is seen dropping significantly in 2020, without a rebound in 2021, with stable returns kicking in from 2022 to 2024 comparable to historic growth.
The second scenario will lead to global personal wealth rising at a slower CAGR of 3.2pc to $265trn by 2024.
The bleakest scenario of lasting damage would entail a significant GDP drop in 2020, without recovery in 2021.
The first signs of recovery can only be seen in 2022, followed by more stable growth in 2023 and 2024.
A very significant drop is seen in the stock market this year, followed by another dip in 2021, with weak recovery being felt from 2022 to 2024.
In the likelihood of ‘lasting damage’, global personal wealth may crawl to $243trn by 2024, with a CAGR of 1.4pc.
Regardless of which scenario emerges, wealth management providers are likely to face more pressure, as client needs and expectations are changing at an accelerated pace, competition is intensifying, and cost-to-income ratios have been significantly higher than prior to the previous financial crisis – 77pc in 2018 compared with 60pc in 2007.
“With the uncertainty and unpredictability surrounding the economic climate, wealth managers and CEOs should immediately begin strategising for each of the scenarios that have been outlined,” said Mr Bosca.
Historically, GCC wealth grew strongly and was multiplied by four in the last 20 years, going forward, GCC personal wealth is expected to grow by $100bn to $400bn, depending on the post-covid rebound.
In 2018, BCG had projected personal wealth in Bahrain growing at a CAGR of 4pc to $54bn in investible assets by 2022.
The firm’s 2015 report put the spotlight on Bahrain with the country reporting the world’s second-highest density of millionaires with 123 out of every 1,000 households holding private wealth greater than $1m.
avinash@gdn.com.bh
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