Spain’s wealthy population is set to grow but the dispute with Catalonia could put an end to the optimism.
According to a new report from PBI’s sister company WealthInsight, Spain’s millionaires are expected to grow at a fast pace compared to the country’s economic situation, with figures forecasting a growth rate of 23.2% to over 277,315 millionaires by 2017. Not only will there be more millionaires in the market, the amount they possess will increase by 27.7% to just under US$1.3 trillion.
Spain has struggled immensely since the financial crisis hit in 2008, with unemployment continuing to rise since 2004 and negative GDP since 2008, Catalonia wants now more than ever to be independent. Does Spain realise that losing Catalonia will make the recovery that much more difficult? According to a new report from WealthInsight, Spain’s HNWIs are expected to grow at a fast pace compared to the economic situation in the country, with figures forecasting a growth rate of 23.2% to over 277,315 HNWIs by 2017. Not only will there be more HNWIs in the market, the amount they possess will increase by 27.7% to just under US$1.3 trillion.
Tensions have risen since the financial crisis started, with many Catalonians feeling like they have been holding up Spain’s economy. WealthInsight analysis shows that the state of Catalonia holds the second highest number of HNWIs in the country, at a figure of 48,900 which is 21.7% of the overall HNWI population. Catalonia also has Spain’s highest regional population of 7.3 million which is 15.8% of the overall populace.
"Spain is very concerned about the situation with Catalonia and its HNWIs, with the country losing some considerable income for taxes from this section of the population if the deal goes through in the future. The Spanish government will also miss out on the tourism the region attracts, with Barcelona being a key strategic area that Spain would like to keep in its borders", says WealthInsight Analyst, Tom Carlisle.
"A hefty amount of Spanish banks and wealth managers also have head offices in the Catalonia region. Meaning in the unlikely event that independence could happen, there may well be a lot of shuffling by banks to make sure there HNWIs and customers get the best terms", says Carlisle. "With Spain struggling on so many economic levels, their priority is to make sure that Catalonia does not leave Spain. If this happens, Spain need to implement a strategy that entices HNWIs to invest within Spain and increase the overall prospects of the economy", says Carlisle.
Spanish millionaires investing offshore
Although Spain has a high level of HNWIs, many Spanish millionaires have a large amount of capital in foreign countries, with figures showing offshore foreign investment at 41.8% in 2012. In 2012, Europe accounted for 47.1% of the foreign assets of Spanish millionaires. It was followed by Central & South America with 19.4%, North America with 17.4% and the Asia Pacific with 12.5%.
According to Tom Carlisle, "With the Spanish economy still declining compared to other European countries, many Spanish millionaires would rather invest their capital in emerging economies where they know they will get a positive return on their investments." By 2017, WealthInsight expects millionaires to decrease their assets in Europe to 45.5%, with assets in Spain increasing by a further 1.3% according to WealthInsight.