Russian billionaires get richer, while Russia – quite contrary 

Russian billionaires get richer, while Russia – quite contrary

In 2016, the global wealth has increased by $3.45 trillion. According to the Global Wealth Report, the welfare of Japan has grown most of all, while the UK has become the most depleted. The Russian well-being parameters deteriorated as well.

Since the middle of 2015 and until the middle of 2016, the world population has become richer by $3.45 trillion – to $255.7 trillion, the Global Wealth Report states. The study is carried out by Credit Suisse on the annual basis. The total wealth of the world has grown by 1.4%.

Japan has become the absolute leader in the increase of wealth; it has grown by $3.9 trillion and reached $24 trillion. The authors of the study, though, explain this by appreciation of the Japanese yen against the dollar. The USA is on the second place – its total wealth has increased by $1.7 trillion, to $85 trillion. Six other countries – Germany, France, Canada, New Zealand, Indonesia, and Brazil – have demonstrated the growth over $100 billion.

Great Britain was the main loser in the rating, it has lost $1.5 trillion due to the falling pound sterling and Brexit. The next is China whose population has lost $680 billion due to the decline of market indices and depreciation of the yuan. Mexico and Russia share the third place; their welfare has decreased by some $198 billion.

The well-being of households demonstrates a different picture. Japanese and New Zealand families have grown richer most of all – by 19% and 14% respectively. Hong Kong was at the third place with the growth less than 10%. The three leaders in impoverishment were Argentina, Ukraine, and Russia; the well-being of families in these countries has decreased by 27%, 18%, and 14.4% respectively.

Geography of well-being

According to the study, the richest nations with the average level of individual wealth over $100 thousand per person live in North America, Australia and Oceania, Japan, and Western Europe. Portugal and Slovenia with their average individual wealth of $25-100 thousand are exceptions. This ‘intermediate wealth’ group also includes Czech Republic, Estonia, Hungary, some Middle-Eastern countries (Bahrain, Lebanon, Oman, and Saudi Arabia), and large developing markets of Asia (Hong Kong, Taiwan) and South America (Chile, Costa Rica, and Uruguay).

Russia, together with most East European countries, China, Brazil, Mexico, and Indonesia, form the group with the personal wealth of $5-25 thousand per citizen. A poorer group of countries with the personal wealth below $5 thousand included states of the Central Africa, Central Asia, India, Bangladesh, Cambodia, Belorussia, Moldavia, and Ukraine.

The authors of the study emphasize that since 2000, the role of the developing countries in the global distribution of wealth has increased considerably. In the beginning of the century, these countries constituted only 12% of the world wealth, while now this figure is 18%. The material inequality continues to grow: 10% of the population own 89% of the world assets – while in 2010 they owned some 86%.

Russia slides into poverty

According to the Global Wealth Report, in Russia the overall income of the population decreases – while the number of super-rich Russians grows. During the reporting year, the Russians have become poorer by $198 billion. The wealth of Russian households has reduced from $12 thousand to $10.3 thousand per person; it is now some $1.12 trillion – like it was in 2004. The number of dollar millionaires has reduced by 16% – to 79 thousand people, while the number of dollar billionaires increased from 90 to 96. Only the USA and China have more dollar billionaires – 582 and 244 respectively.

According to Credit Suisse, currently the wealthiest 10% of Russian households own 89% of the total household assets. To compare: in the USA, the wealthiest 10% of households own 78% of assets, in China – 73%. The study also notes that 28 million of Russians live below the poverty line; their assets do not exceed $248. By this parameter, Russia is between Indonesia (30 million of people live below the poverty line) and Ethiopia (27 million people).

Credit Suisse experts believe that the depreciation of the ruble due to sanctions imposed by the USA and EU was the main reason for the reduction of wealth. In 2007, the dollar exchange rate was 25 rubles, in the middle of 2014 it has reached 34 rubles, and in spring 2016 – 64 rubles. The devaluation of the ruble has negated the growth of wealth in Russia since the beginning of the century. “Although the welfare level per person has increased from $2.94 thousand in 2000 to $10.3 thousand now, the current welfare level per adult is not higher than 10 years ago,” – the authors state.

Grigory Sedov, Managing Director, Private Clients, of Aton investment company, disagrees that the impoverishment of Russians was caused by Western sanctions. According to him, the main factor was the drop of oil prices. “The well-being of Russians depends directly on the commodity prices that had hard times in the end of 2015 – beginning of 2016. This affects the economy with a delay of six to nine months – which was confirmed by minimal GDP growth rates in the middle of 2016,” – he says.

According to Sedov, now the commodity prices have begun growing again, which allows hoping for a rise in living standards in Russia. The financial expert believes that the current number of dollar millionaires in Russia is higher in comparison with the study period because the consumption and business incomes increase with the economic growth.

Lilia Ovcharova, Director of the Institute for Social Policy of the National Research University Higher School of Economics, believes that the disparity between the rich and the poor has reached its maximum and won’t grow anymore. She thinks though that it won’t decrease in the next ten years as well. “This could be possible if our middle class was growing. But so far it is shrinking. In addition, the taxation of the richest stratum has to increase. High level of monopolism in the economy also contributes to the material disparity,” – Ovcharova emphasizes.


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How to preserve wealth

Andrei Gritsenko, General Director of Capital Asset Management Closed Joint Stock Company, recommends those who don’t want to become poorer to get additional education. The new skills allow, if necessary, to change the field of work. “Upgrade your education in the economic bases, – Gritsenko says. – This would allow not only to earn more money but master new investment techniques”. According to the expert, today the average Russian knows only about the bank deposits and gold.

Anton Graborov, Director of Client Services in BCS Premier, believes that the Russians need to learn to manage their expenses, abstain from spontaneous purchases and extra costs, and control their budget. Financial experts recommend to be cautious with credits, use those only when it is really necessary, and carefully review the rates and terms. “It is necessary to make regular savings and create a personal reserve fund,” – Graborov says. It is important to distribute the savings competently between currencies, financial instruments, and organizations. This would eliminate extra risks from one side and ensure profitability exceeding the inflation rate from the other side, he concludes.

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