Increase attributed to economic growth and the robust crown

The number of dollar millionaires in the Czech Republic jumped 15 percent last year to 17,000, owing to economic growth, the strong crown and the falling dollar, according to the annual World Wealth Report published by the consulting firm Capgemini and investment bank Merrill Lynch June 24.
The past few years have seen a steady increase in the number of Czechs with liquid assets exceeding $1 million (15.4 million K?). In 2006, the total rose 12.6 percent and, a year earlier, it grew 10.6 percent.
“It’s a solid result,” said Patrik Horný, Capgemini’s local managing director.
“It could be lower if the economy weren’t that good,” he said. “We can be happy that we have such a high number. And 15 percent growth is one of the best results in the world. China had 20 percent — and China isn’t just any country.”
In emerging markets, the wealthy elite are growing at a faster rate than in West European countries. This reflects the Czech Republic’s galloping economy, which is rising much faster than that of Germany or France, Horný said. Millionaires are mainly recruited from owners or former owners of companies, many of whom gained property during the post-communist restitution.
The country’s richest man remains the billionaire Petr Kellner, who owns the financial group PPF. This past year, Kellner entered the top 100 of the world’s richest people as ranked by the U.S. magazine Forbes, with his combined assets reaching $9.3 billion.
“Another large source of high-net-worth individuals are managers in the upper levels of international companies,” Horný said. “There are already several hundreds of these [companies active in the Czech Republic].”
The growth of this group does not come as a surprise since the savings rate in the Czech Republic is higher than in Western Europe and the cost of living is lower. In addition, top-level salaries are growing at a higher rate.
The subprime mortgage crisis that shook U.S. financial markets hasn’t had that much of an impact on millionaires here. “These people are very rich, very smart and have very good advisers,” Horný said.
But millionaires are making different investment choices than a year ago, moving away from property funds to more secure investments, safe havens like secure company shares and fixed income such as government bonds or deposits in bank accounts.
“We see that the people are investing more into home countries, which is a little bit more secure because they know where they are,” Horný said. The 2006 World Wealth Report found the exact opposite. “[Then] we reported that people are going out of their home countries and spending money in other countries.”
The highly affluent started to catch local banks’ interest just two years ago. “The banks are in a situation where they have to spend money and energy in their own brands,” said Horný, who does consulting for banks. “In private banking, one of the major factors is how to get clients to trust you,” he added.
With the depreciating dollar, it doesn’t make any sense for U.S. millionaires to take their investments abroad, Horný said. The same is true for Czechs, for the opposite reason.
“Czechs have a problem of where to invest money because all the other currencies are depreciating — so if you invest in euros, you just lose money,” he said. “Therefore, they are spending money in their home currency or in Eastern European currencies.
“That’s also the reason why all the big investment personalities, these Kellners, are investing more in Eastern Europe.”