Financial wealth in the UAE is forecasted to rise from $1 trillion to $1.3 trillion in five years, experiencing a Compound Annual Growth Rate (CAGR) of 5.5% between 2002 and 2027, according to a new report.
Findings by strategic management firm Boston Consulting Group (BCG) also places the UAE as the leader in terms of annual growth rate in the GCC, placing it ahead of Saudi Arabia, which is expecting a CAGR of 4.3% for the same period, to see its financial wealth rise from $1.1 trillion in 2022 to $1.3 trillion in 2027.
The BCG report, titled ‘Global Wealth Report 2023: Resetting the Course,’ revealed that equities and investment funds made up the largest asset class at 58% of total personal wealth in 2022 in the UAE, while bonds are expected to grow the fastest with a CAGR of 8.4% between 2022 and 2027. Life insurance and pensions are set to become the third largest asset class by 2027.
“Representing 13.2% of the Middle East and Africa’s (MEA) financial wealth in 2022 and growing at a rate of 6.5% per annum from 2017 to reach $1 trillion in 2022, the UAE’s trajectory signals the country’s strong position as one of the preferred global destinations for the wealthy,” said Mohammad Khan, Managing Director and Partner, at BCG, in a statement, adding that the growth has proven to be a strong value proposition for high-net-worth individuals.
UHNW individuals take the lead
In 2022, approximately 25% of the UAE’s financial wealth originated from Ultra High Net Worth (UHNW) individuals, worth more than $100 million. The influence of these individuals is anticipated to continue to remain consistent until 2027, according to the report.
Additionally, individuals with wealth between $1 million and $20 million held 32% of the UAE’s wealth in 2022, which is expected to grow to 34% in 2027.
Other key findings revealed that real assets in the UAE grew by 7.5% per year from 2017 to 2022, reaching $1.9 trillion, with a forecasted growth to increase by 6.9% per annum to reach $2.6 trillion by 2027. Simultaneously, the liabilities sector expanded by 3.1% per annum during the same period and is expected to grow by 6.3% per annum to $0.2 trillion by 2027.
Growth in Saudi Arabia
As Saudi Arabia targets its Vision 2030 milestones, experts at BCG state that diversification will be key in maintaining its growth trajectory in coming years.
According to the report, unlike the UAE, currency and deposits represented the largest asset class in the kingdom and made up nearly half of the total personal wealth in 2022 at 48%, while bonds are expected to show the fastest growth with 7.4% CAGR between 2022-2027. Additionally, life insurance and pensions are expected to become the third-largest asset class by 2027.
Saudi Arabia represented 14.5% of the MEA’s financial wealth in 2022, with approximately 21% originating from UHNW individuals. This trend is anticipated to remain consistent until 2027.
The report also found that real assets in Saudi Arabia are expected to grow from $2.7 trillion in 2022 to $3.6 trillion in 2027, with a CAGR of 5.8%. Alternatively, liabilities in Saudi Arabia are projected to grow from $0.2 trillion in 2022 to $0.4 trillion in 2027, with a 10.1% CAGR.
Rest of GCC
The rest of GCC appears to be on a similar growth trajectory with financial wealth in Qatar expected to grow by 5.1% annually to reach $388 billion by 2027, driven largely by equities and investment funds that emerged as the largest asset class in the country, making up 48% of total personal wealth in 2022.
However, life insurance and pensions are expected to have the fastest growth rate of 7.1% CAGR in Qatar, between 2022 to 2027.
Kuwait’s financial wealth is forecasted to grow by 2.7% annually, reaching $302 billion by 2027, according to BCG. Interestingly, while approximately 24% of the country’s wealth originated from UHNW individuals worth more than $100 million, individuals worth under $250,000 held a significant 30% of the wealth in 2022, and this is also expected to remain the same by 2027.
Equities and investment funds remain the largest asset class in Kuwait, making up 57% of total personal wealth in 2022.
In Oman, UHNW individuals contributed to 23% of the sultanate’s wealth in 2022, which projected to increase to 24% by 2027, taking the country’s financial wealth to $141 billion by 2027.
With one of the highest CAGR in the GCC of 4.9%, Bahrain’s financial wealth is expected to hit $89.1 billion by 2027, boosted by equities and investment funds that made up 56% of total personal wealth in 2022.
(Reporting by Bindu Rai, editing by Seban Scaria)