Will the Bulgarian get richer or poorer in 2020?

Gross financial assets of households around the world grew by 9.7 percent in 2020, reaching the “magic” € 200 trillion. for the first time in history, shows the Allianz report on the well-being of the people of 60 countries, including Bulgaria. Covid-19 destroyed the lives and livelihoods of millions of people, and the world economy plunged into its deepest recession since World War II. At the same time, monetary and fiscal policy have mobilized huge sums to support the economy, markets and people, the company said.

The main engine is savings, according to Allianz. Health measures have limited consumption opportunities, triggering the phenomenon of “forced savings”. The data show that new savings rose 78 percent to € 5.2 trillion, an absolute record.

Inflows in bank deposits (option for forced savings, when unspent income remains in the bank account) almost tripled (+ 187%). Deposits represent half or more of the new savings in all the markets concerned. As a result, for the first time, bank deposits grew globally by a double-digit rate of 11.9%. The previous peak of growth was 8% in 2008 during the financial crisis. While assets in securities backed by strong stock markets rose 10.9 percent, the assets of insurance and pension funds showed much weaker growth, rising 6.3 percent, the report said.

2021 should also be another good year for households, as total financial asset growth worldwide is around 7%. “The numbers are very impressive,” said Ludovic Subran, Allianz’s chief economist. “But we need to dig deeper. Most households have not saved, they have simply put their money aside. All this extra money in bank accounts is a wasted opportunity. Instead, households need to invest in retirement and the green transition, giving an opportunity for societies to tackle the primary challenges we face – climate and demographic change. saving “, he is categorical.

In 2020, financial assets in emerging markets (+ 13.9%) grew again faster than in developed markets (+ 10.4%), returning to the familiar growth patterns after a three-year period. As a result, the gap in prosperity between rich and poor countries has also narrowed somewhat.

Where is Bulgaria?

Gross financial assets of Bulgarian households increased by a meager 0.1% in 2020, which is the weakest increase since 2000. Thus, Bulgarian households are among the few unfortunate savers who did not feel an increase in 2020. The main reason for this is the asset class in securities, which represents 43% of all assets and has decreased by a whopping 9.3%. This is the first decline since 2012, due in part to the fact that Bulgarian savers became net sellers of securities in 2020. The other two asset classes – bank deposits and insurance and pension fund assets – showed strong growth, increasing by 10.0% and 10.8%, respectively. But unlike most neighboring countries, there is no way to talk about a savings boom. On the contrary, new savings fell close to zero (the increase in bank deposits is simply the reverse of the sale of securities), say Allianz.

Debt growth slowed to 5.0%, the slowest increase in four years. Due to the contraction of economic production in 2020, the debt ratio (liabilities in% of GDP) jumped to 31%. This is still significantly below the levels observed, for example, in the Czech Republic (42%) or Slovakia (51%).

In the end, net financial assets shrank by 1.1%. With net financial assets per capita of EUR 10,010, Bulgaria remained in 35th place in the ranking of the richest countries (financial assets per capita, see the table for the top 20). Thus, Bulgaria ranks in a defensive position among the countries in the region – under Slovenia (25), the Czech Republic (26) and Hungary (30), but is ahead of Poland (37), Slovakia (38) and Romania (40). Moreover, since 2000, Bulgaria has climbed seven steps, emphasizing the successful catching-up process in recent decades. This contrasts with many Western European countries such as Italy, France, Belgium or the United Kingdom, which have fallen dramatically in the 2000 rankings. As a result, the top ten today looks different from 2000: The United States and Switzerland still reign.

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