Regardless of rising inflation, Turkey ranks first within the world rating of wealth development

Golden Horn and Bosphorus at sunset, Istanbul, Türkiye

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In an annual ranking of global prosperity levels, Turkey performed miles ahead of the rest of the world – a result that may come as a surprise given the country's high inflation.

“Turkey stands out with an astonishing growth in wealth per adult of over 157 percent between 2022 and 2023, leaving all other nations far behind,” wrote Swiss bank UBS in its Global Wealth Report 2024, using the local spelling of the country’s name.

The countries with the highest average growth in wealth per adult were Russia and Qatar, at almost 20 percent, and South Africa, at just over 16 percent. In the United States, average wealth per adult rose by almost 2.5 percent.

Inflation in Turkey is almost 72%, a frightening figure for the country's 85 million inhabitants, many of whom have seen their purchasing power fall dramatically in recent years. Over the past five years, the Turkish lira has lost almost 83% of its value against the dollar, and the Forex trading at 33 lira per greenback (as of Wednesday, 09:07 London time).

But Turks who own assets such as homes have become more wealthy as inflation drives up the cost of these possessions.

The UBS report defines net worth or “wealth” as “the value of financial assets plus real assets (mainly residential real estate) owned by households, minus their debts.” In a conversation with journalists, some of the report’s authors analyzed the relationship between inflation and wealth growth in Turkey.

“In a way, the high rate of inflation also helps to explain why wealth in local currency has increased much more, at least [more] than in other countries, because one should not forget that wealth is measured in nominal terms,” ​​Samuel Adams, economist at UBS Global Wealth Management, told CNBC.

“When inflation is very high, it's common for real estate to see real estate prices rise in line with inflation, if not faster,” he said. “So anyone who owns a home or owns stocks that also do quite well in that kind of environment can see their wealth grow faster.”

“Of course, that doesn't mean that everyone benefits to the same extent,” Adams added. “If you're not in those assets and your wage increases aren't keeping up with inflation, then of course that's going to be impacted quite negatively.”

The report also pointed to the “currency effect,” which has the strongest influence on wealth growth: wealth growth figures in local currencies often differ significantly from those in dollars.

“Turkey's already exceptional growth of over 63% in USD … doubles to almost 158% in Turkish lira,” it says. Other examples in the report include Japan, where average wealth growth per adult between 2022 and 2023 was less than 2% in US dollar terms, but 9% in local currency.

Cityscape at sunset on March 4, 2024 in Istanbul, Türkiye.

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When analyzing the average wealth growth of each country between 2008 and 2023, “the most dramatic development occurred in Turkey,” writes UBS, “where average wealth per adult increased by 1,708 percent in local currency during this period.”

Paul Donovan, chief economist at UBS Global Wealth Management, pointed out that having a high asset value does not necessarily mean having a lot of cash. In fact, the opposite may be the case in Turkey.

“In terms of living standards rather than wealth, it's also important to remember that if you own a home that has gone up in value, but at the same time your real wages can be negative. So you can be wealthy and cash poor,” Donovan said last week.

“This is quite possible, because many of the tensions that have emerged in the Turkish economy in recent years have been due to negative real incomes,” he added. “This does not necessarily have anything to do with developments on the asset side.”