Golden Horn and Bosporus at sunset, Istanbul, Turkey
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Turkey leads the rest of the world by a wide margin in annual global wealth rankings – a result that may come as a surprise given the country’s high inflation levels.
“Turkey’s per capita wealth will grow by an astounding 157% between 2022 and 2023, leaving all other countries far behind,” Swiss bank UBS wrote in its 2024 Global Wealth Report, which uses The local spelling of the country’s name.
In terms of per capita wealth growth, the second-ranked countries are Russia and Qatar, with an increase of nearly 20%, while South Africa is slightly more than 16%. In the United States, average wealth per adult increased by nearly 2.5%.
Türkiye’s inflation rate is close to 72%, That’s an eye-popping figure for the country’s 85 million people, many of whom have seen their purchasing power plummet over the past few years. Over the past five years, turkish lira The exchange rate against the US dollar has depreciated by nearly 83%. currency trading As of 09:07 a.m. London time on Wednesday, the exchange rate was 33 lira against the dollar.
But for Turks who own assets such as homes, wealth has grown as inflation has pushed up the cost of those assets.
The UBS report defines net worth, or “wealth,” as “financial assets plus the value of physical assets owned by a household (primarily a home) minus debts.” In a call with reporters, some of the report’s authors analyzed the relationship between inflation and wealth growth in Turkey.
“In some ways, the high rate of inflation also helps explain why wealth in local currencies has grown much faster, at least (more) than in other countries, because it’s worth remembering that wealth is measured in nominal terms. ,” Samuel Adams, economist at UBS Global Wealth Management, told CNBC.
“If inflation is very high, what tends to happen is that if you own a physical asset like a home, house prices tend to rise with inflation, or even faster,” he said. “So people who own homes or own stocks also tend to do quite well in these environments, they tend to see their wealth accumulate a little faster.
“Of course, that doesn’t mean everyone will benefit to the same extent,” Adams added. “If you don’t hold those assets, if your wages don’t keep up with inflation, then, of course, it’s going to be quite negatively impacted.”
The report also identifies the “currency effect” as the factor that has the greatest impact on wealth growth – where wealth growth figures in local currencies often differ significantly from those in US dollars.
“Turkey has achieved impressive growth of more than 63% in dollar terms … more than doubling in Turkish lira terms to nearly 158%,” the report said. Other examples in the report include Japan, which in 2022-23 , Japan’s average wealth per adult growth rate is less than 2% in U.S. dollar terms, but in local currency terms, the growth rate is 9%.
Cityscape of Istanbul, Turkey at sunset on March 4, 2024.
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UBS wrote that in assessing average wealth growth across countries between 2008 and 2023, “the most dramatic changes occurred in Turkey,” during which “average wealth per adult in local currency terms surged during this period.” An increase of 1708%.
Paul Donovan, chief economist at UBS Global Wealth Management, noted that asset abundance does not necessarily mean cash abundance – in Turkey, the opposite may be true.
“In terms of living standards rather than wealth, it’s also important to remember that if you own a house, the value of your house has gone up, but at the same time your real salary may be negative. So you can… “Asset rich but cash poor,” Donovan said last week.
“It’s certainly a possibility that a lot of the stress in the Turkish economy over the past few years has been caused by negative real incomes,” he added, “not necessarily what’s happening on the asset side.”
