World Could Lose $16 Trillion in Wealth Due to Coronavirus, Report Finds

The world could lose up to $16 trillion in wealth, due to the coronavirus pandemic, according to a new report.

The report, published by Boston Consulting Group (BCG), found that the economic turmoil caused by the pandemic, could impact economic growth across the globe, over the next five years.

"As we enter the 2020s, the COVID-19 crisis may present global markets with one of their most severe tests. Businesses everywhere face immense disruption. Millions of individuals are newly unemployed, and most economies have tipped into recession," according to the report. "While the speed of the recovery depends to a large extent on the success of public health measures, as well as on interventions from governments and central banks, the pandemic will almost certainly cause wealth to contract in the near term."

According to the report, personal finances across the globe reached $226 trillion in 2019, which showed an increase of nearly 10 percent from 2018. Despite the figures from 2019, the report found that over the next five years, things could change drastically, with the compound annual growth rate (CAGR) decreasing to 1.4 percent, in the report's worst-case scenario.

"Economic impacts are severe enough to cause long-term disruptions in labor and productivity. Under this scenario, wealth would decrease to $210 trillion in 2020 and then increase to $243 trillion by 2024, a CAGR of just 1.4%," the report says.

The report also discusses a "quick rebound," model as well as a "slow recovery" model. The report's model for a quick rebound suggests a CAGR rate of about 4.5 percent, as wealth would increase from $226 trillion in 2019 to $282 trillion in 2024. For the slow recovery model, the report predicts a CAGR of 3.2 percent, with global wealth decreasing to $215 trillion in 2020, but then increasing to $265 trillion in 2024.

In an email sent to Newsweek, Anna Zakrewski, global leader of BCG's wealth management practice and lead author of the report, suggested that the world's wealthiest people will be hit hardest by the economic downturn caused by the coronavirus pandemic.

"We see the highest impact on High-Net Worth Individuals with personal wealth of more than a million [U.S.dollars]. The main reason for this is that these individuals have a higher share of equities and investment funds amongst their assets, which exposes them much more to stock market volatility than others," Zakrewski wrote.

Coronavirus in U.S.
A sign advertises business services as stores prepare for gradual reopenings in the coming weeks on June 16, in New York. The report found that in a worst-case scenario, over the next five years, the compound annual growth rate could decrease to 1.4 percent. Spencer Platt/Getty

Across different regions of the globe, the report found that North America could suffer the most, while Asia could see a much larger increase in wealth and could overtake Western Europe as the second wealthiest region in the world by 2022.

"Looking ahead, macroeconomic data suggests that Asia, excluding Japan, will continue to see rapid rates of wealth growth. BCG modeling suggests that wealth across Asia, excluding Japan, will grow at between 5.1% and 7.4% annually over the next five years," the report said. "Wealth in North America, which is more heavily weighted toward equities, could grow at –0.6% to 3.7% annually from 2019 to 2024, depending on how severely the COVID-19 crisis damages the global economy."

In her email sent to Newsweek, Zakrewski added that "the potential advent of big techs in wealth could conceivably play a significant role in the next decade."

"Big techs have already established relationships and access to younger generations; they have the digital capabilities required to win the future—and the checkbook to buy the wealth management experience they still need," she continued. "In the current situation, COVID is obviously a game changer and the main unknown variable. We assume that wealth will begin to grow again post 2020—but if a vaccine cannot be found, new varieties of the virus turn up or other unknowns happen, we might have to revisit our assumptions."