Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, Allianz Research.
Liabilities: Long-term stability
The interest-rate turnaround is also clearly felt on the liabilities side of the private household balance sheet. Global private debt had still risen by +7.8% in 2021. But in 2022, growth weakened significantly to +5.7%, roughly in line with the increase in the second half of the 2010s. Overall, global household liabilities totaled EUR55.8trn at the end of 2022 (Figure 13).
Figure 13: Slow down
Global private liabilities, in 2022 EUR trn and annual change, in %
At the same time, nominal growth in global economic activity remained at a high level (+9.6%) – "thanks" to inflation. The gap between debt and economic growth widened to 3.9pps in 2022 – only in 2010, in the immediate aftermath of the GFC, it was ever larger. As a result, the debt-to-GDP ratio (liabilities as a percentage of GDP) has fallen significantly by more than 2pps. Compared to 2020, the pandemic-related peak, the decline is even more than 4pps (Figure 14). This means that the global debt ratio for private households is back at about the same level as at the beginning of the millennium – a remarkable level of stability that hardly fits the widespread narrative of a world drowning in debt.
However, there are major differences between the regions. In advanced economies such as North America, Japan or Western Europe, the debt ratio has remained stable (despite temporary outliers during the GFC). In North America and Japan, the debt-to-GDP ratio even fell slightly (-1pp and -4pps, respectively), while the ratio in Western Europe rose by almost 8pps. At 72%, however, it is still below the levels in Japan (74%) and North America (79%). The exceptions among the advanced economies are Australia and New Zealand, where the debt ratio rose by almost 30pps to a world record of 113%. At least this value is again below the previous highs in 2016 and 2020, when it hit 122%.
In the majority of emerging markets, on the other hand, the debt ratio has risen sharply over the last two decades. China is at the top of the list, with its ratio more than tripling to a good 61%; in the other emerging market regions of Latin America and Eastern Europe, it "only" doubled and also at a relatively moderate level. A word about the rest of Asia, whose stability is perhaps somewhat surprising in this context. This is primarily a statistical phenomenon: Over the years, the weight of the poorer and less indebted countries has increased, which dampens the regional increase; in addition, there was a strong decline in Singapore. At the country level, the picture is different: In many emerging economies of the region such as India, Indonesia or the Philippines, the ratio has developed rapidly from very low starting points, as in China, and has tripled over the last few years. Moreover, in some countries of the region, the debt ratio has reached alarming levels, not only in the richer ones such as South Korea (108%) or Taiwan (92%), but also in Thailand (87%) and Malaysia (81%).
Over the years, the weight of the poorer and less indebted countries has increased, which dampens the regional increase; in addition, there was a strong decline in Singapore.
Figure 14: Long-term stability
Private liabilities as a percentage of nominal GDP, by region
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, Allianz Research.
However, another way of looking at it shows that the debt problem of private households as a whole is not necessarily worrying: the comparison of liabilities to financial assets. This value – liabilities as a percentage of financial assets – has declined worldwide in recent years, albeit only slightly (4pps, Figure 15). There are only three regions where debt has grown faster than financial assets on average: Latin America, Eastern Europe and China. But even in these regions, the development does not appear dramatic. The level of debt relative to financial assets is still relatively low, ranging from 24% (Latin America) to 31% (China). In fact, there are only a handful of countries worldwide where the debt mountain accounts for more than 50% of financial assets, including Finland (51%), Slovakia (52%), Thailand (53%) and Norway (70%). In the US, by contrast, this ratio was 18% at the end of 2022.
Figure 15: More wealth than debt
Liabilities as a percentage of gross financial assets, by region
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, Allianz Research.
The music stops in China
However, if only the development of debt itself is considered, the dynamics in many countries were breathtaking. Once again, China leads the way. Over the last two decades, private liabilities in the Middle Kingdom have grown by an average of almost +20% year after year (Figure 16). What is equally striking, however, is the rapid crash in 2022: Last year's debt growth (+5.4%) was not only well below the long-term average and the growth in 2021 (13.9%), but in fact the lowest rate ever recorded; so far, debt growth has always been in double digits in all the years for which comparable data are available. If any further proof was needed that China's property market is in precarious shape, it can also be found in this dramatic slowdown in private debt growth. Besides China, growth in liabilities was also very high in Latin America and Eastern Europe over the long run. However, inflation played a bigger role in both regions. Among the advanced economies, Japan and North America stand out as in both regions debt growth in 2022 was above the long-term average. In North America, this was mainly the result of the lean years after the GFC in which debt growth not only slowed down but turned negative: debt was reduced on balance. In Japan, on the other hand, the relatively strong increase in private debt – by Japanese standards – could perhaps signal that the country is actually succeeding in freeing itself from the years-long grip of deflation.
Figure 16: The music stops in China
Increase of private debt by region, in %
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, Allianz Research.
Western Europe and Japan are experiencing equally sharp declines.
In view of these figures, it is hardly surprising that there have been significant shifts on the world debt map over the last two decades. In contrast to financial assets, the position of North America has also "deteriorated" (Figure 17). Whereas 20 years ago almost half of all private liabilities were on North America’s books, the figure was "only" just under 37% by the end of 2022. Western Europe and Japan are experiencing equally sharp declines. In fact, at the beginning of the millennium, these three regions accounted for 92% of all global debt; today it is 65%. The opposite development can be seen in Asia and especially in China: its share of the global debt mountain has literally exploded from 1.5% to 18%. Chinese households now account for more than half of all private liabilities in Asia (including Japan).
Figure 17: De-Westernization
Private liabilities, regional split 2002 and 2022, in 2022 EUR and %
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, Allianz Research.
Despite the rapid growth dynamics and shifts on the debt world map, the debt burden that households in emerging markets have to shoulder is, of course, only a fraction of that incurred by households in advanced economies: the latter exceeds the former by a factor of 12 (Figure 18). The three countries with the highest debt per capita worldwide are Switzerland (EUR117,500), Norway (EUR80,300) and Australia (EUR70,900). In the group of emerging markets, China is already in third place; only in Chile (EUR7,300) and Malaysia (EUR9,200) was debt per capita higher at the end of 2022.
Figure 18: Under the yoke
Private liabilities per capita 2022, in EUR
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, Allianz Research.
A bad year
Declining assets and rising liabilities mean that net financial assets (financial assets minus liabilities) fell significantly in 2022 by -5.1%, the worst growth rate since the GFC in 2008 (-11.8%). Overall, global net financial assets amounted to just under EUR177trn at the end of 2022; this means a decline of EUR9.6trn compared to the previous year.
The development in the individual regions varied greatly. The strongest declines were recorded in the advanced regions such as North America and Western Europe – and in Latin America. Here, a moderate decline in assets (especially in Brazil) met with unabatedly high demand for credit; as a result, the decline in 2022 even exceeded that of 2008 (Figure 19). In other regions, however, especially in Asia and Eastern Europe, assets continued to grow faster than debt in 2022, resulting in rising net financial assets. In China, for example, net financial assets climbed to EUR22.8trn – about three quarters of the Western European value; at the beginning of the millennium, it was just one tenth.
Figure 19: A bad year – but not for all
Net financial assets, CAGR 2003-2022 and growth 2022 / 2021, in %
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, Allianz Research.
Again, it is worth adjusting these data for population growth and especially inflation (Figure 20). At first glance, the picture is very similar to that of gross financial assets. China is the undisputed leader, with net per capita financial assets, adjusted for purchasing power, increasing more than seven-fold in the last two decades. No other region can keep up, not even the other emerging market regions, where a doubling can rather be observed. Among the advanced economies, it is noticeable that Western Europe and Japan have swapped places: Western Europe now carries the red lantern. Those who speak of lost decades in Japan should not remain silent about Western Europe.
Figure 20: China remains on top – by a wide margin
Net financial assets per capita, nominal and real increase over 2002, in %
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, Allianz Research.
Even more interesting is the direct comparison of the development of gross and net financial assets. A clear pattern can be seen here: In emerging markets, the latter lags behind the former, i.e. debt growth exceeds that of assets. In the advanced economies, it is generally the other way round. For the world as a whole, this results in a plus of around +10% in net asset growth over that of gross assets (Figure 21). Asia (ex China and Japan) seems to be out of line but this is entirely due to the richer countries in the region such as South Korea, Taiwan and especially Singapore. What is true for China is also true for the region's emerging markets: liabilities reduce asset growth significantly, by about a quarter to a third. On the other hand, Japan stands out, with debt-adjusted growth 42% higher; the gap is also quite high in North America (+26%), almost twice as much as in Western Europe. However, this is mainly due to the great heterogeneity of the Old Continent in dealing with private liabilities: On the one hand, there are countries like Spain, Portugal and Ireland, which had to reduce liabilities massively after the euro crisis and which therefore show significantly higher asset growth after debt than before debt (+69%, +47% and 59%, respectively). Germany (+90%) and the Netherlands (+51%) also belong to this group. On the other hand, countries such as Italy (-68%), Belgium (-65%), Finland (-43%) and France (-11%) have seen their debt grow faster than their wealth over the past 20 years.
A clear pattern can be seen here: In emerging markets, the latter lags behind the former, i.e. debt growth exceeds that of assets.
Figure 21: The one chart that Japan tops: private austerity
Difference of per capita net and gross financial assets' real increase over 2002, in %
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, Allianz Research.
Where is the development of net financial assets heading? In Figure 22, we provide the ranking of the richest 25 countries by per capita net financial assets at the end of 2022. It shows that Switzerland has lost its first position to the US. However, with per capita debt in Switzerland at EUR117,500, more than twice as high as in the US (EUR54,500), the change of position is not really surprising. There are also some changes in the other position, but nothing very serious. New Zealand and Italy, for example, fared four places better; Japan and Spain (+3 each) also improved. In contrast, Norway (-9) and Australia (-5) fell back significantly.
Figure 22: Leadership change
Net financial assets per capita, in 2022 EUR
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, Allianz Research.
The richest region in the world by far has kept its share constant – this once again underlines the exceptional role America plays in the world of finance.
This different pace of growth has led to shifts in the regional composition of global financial assets. In the last year alone, for example, China's share has risen by 1pp to 14.1%. Even more impressive, of course, are the changes over the long term (Figure 11). The breathtaking rise of China in the first two decades of the new millennium becomes clear: its share of global financial assets has increased six-fold in this period. On the other hand, there are two big "losers": Japan and Western Europe. At the beginning of the millennium, these two regions still accounted for almost 43% of the world's wealth but today it is only a quarter. North America's position should also be seen against this background: The richest region in the world by far has kept its share constant – this once again underlines the exceptional role America plays in the world of finance.
Real estate in selected countries
What would the net financial assets per capita ranking look like if real estate values were also taken into account? Due to insufficient data, we have previously refrained from systematically including real estate in our report. But over the years, the statistical recording of house and land values has also made progress. Reliable and comparable data series on the real estate assets of private households are now available for a number of countries, especially advanced economies. In the following analysis, we refer to the following regions and countries: North America, Japan, Australia and Western and Eastern Europe2.
Overall, the real estate assets (value of land and dwellings) of private households in this group of countries amounted to around EUR140trn at the end of 2022. This was 19% less than gross financial assets (EUR177trn.). This is quite surprising, since real estate assets – usually the owner-occupied house – are generally regarded as the largest asset item on the household balance sheet. This is also true for Australia, Eastern and Western Europe: On average, property values were 49%, 23% and 27% higher than financial assets, respectively. In Germany and France, for example, they were even more than 50% higher. But this was not the case in Japan (-37%) and in North America – which accounts for almost half of all real estate values included here. In the US alone, the value of real estate holdings was 39% lower than that of financial assets.
On the other hand, property owners were still able to enjoy strong increases in value in 2022. Overall, the increase was +8.8%. The collapse in demand for real estate caused by the turnaround in interest rates and inflation will only be reflected in a decline in house prices across the board this year. Last year, it was only Australian households that already suffered the first setbacks (Figure 23). In contrast to financial assets, the long-term development is much more synchronous, with average growth rates of between +4% and +8% over the past ten years. Only Japan, with an annual growth rate of less than +2%, stands out somewhat. The development was even worse only in Italy, where prices fell by -0.5% per year on average. On the other hand, there is only one country among those surveyed that can boast a double-digit growth rate over the long term: Hungary with +11.9%.
2 In Western Europe, data are missing for Greece, Portugal, Malta and Ireland. The region Eastern Europe does not include Kazakhstan, Latvia, Romania, Russia, Serbia and Türkiye.
Figure 23: Before the storm
Real estate, CAGR 2013-2022 and growth 2022 / 2021, in %
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, OECD, Refinitiv Eikon, Allianz Research.
For all the other "climbers", it is important to keep in mind that for three of the ten richest countries by net financial assets (Singapore, Taiwan and New Zealand), no data on real estate assets is available; this leads to automatic "upgrades".
In the ranking of countries with the highest real estate assets, Switzerland (EUR295,500) is ahead of Australia (EUR241,100) and the US (EUR186,600). Then come the other Western Europeans, led by Norway (which is of course also due to the data-related limitation of the group of countries examined). What would the ranking look like if net financial assets and real estate assets were shown together? Figure 24 shows that the shifts would not be very serious. Switzerland would again be at the top and Australia in particular would do much better. France, Austria and Norway would also benefit from the inclusion of real estate assets. Sweden and Japan would be among the "losers". For all the other "climbers", it is important to keep in mind that for three of the ten richest countries by net financial assets (Singapore, Taiwan and New Zealand), no data on real estate assets is available; this leads to automatic "upgrades".
Figure 24: Not much change
Net financial and real estate assets per capita, in 2022 EUR
Rank by net financial assets per capita
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, OECD, Refinitiv Eikon, Allianz Research.
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, OECD, Refinitiv Eikon, Allianz Research.
