Generally, there is not much I hate more than doing “cost of living” posts. Everybody and their brother wants to know how much it costs to live in the Philippines. The truth is, though, that there is no number to answer that question. This is especially true when I am talking to somebody that I don’t know.
If I have never met you or gotten to know you well, then how could I answer how much it will cost you to live here. I have no idea what your wants, needs or desires are. The type of house you can live in comfortably may be way different than what I need. I may need to have air conditioning running most of the time, while you may be comfortable in tropical heat. I may like to eat steak, while you enjoy eating squash and carrots. The prices are way different depending on what you need and desire.
I know of people, expats, living in the Philippines on as little as $400 to $500 per month, and I know others who need $5,000 per month to live here. How much will it cost you? It is nearly certainly somewhere in the middle of those two numbers.
A few weeks ago, I was doing some work on this site, and I happened upon an article that I wrote many years ago, back in 2006. The title of the article is How much money do you need to live in the Philippines. When I happened upon the article, I decided to read it and see what I had to say back then. I have written so many articles about the cost of living that frankly, I had forgotten my analysis back in 2006.
When I read it over, I was pretty surprised at how much had changed in the 7 years since then. The cost of living in the Philippines is significantly higher in that time.
One thing that has to be considered is that if you are an expat and are getting your money from the country where you came in, you have two problems. Firstly, the exchange rate has a big impact on how many pesos you get. For example, let’s say that you are receiving a pension of $1,500 per month from your old job back in the USA. Back in the day, the Peso was about 55 to the US Dollar. So, your $1,500 was worth P82,500. Now, with no other changes, the Dollar is worth only about 41 Pesos, so that same $1,500 is now only getting you P61,500. So, you have done nothing, are still earning the exact same amount of dollars, but your spending power has just declined by more than 25%.
Second factor to consider is inflation. Inflation in the Philippines is higher, sometimes much higher than in a developed country like the USA. In the USA these days, inflation may be running only 1% or 2%, due to the poor economy. At the same time, inflation in the Philippines could easily be at 5%, or even up to 7%. So, that kilo of mangoes that was P60 back in 2006, if you factor in inflation of 5% per year would be running P77 now, an increase of P17. Let’s figure it in dollars, since that is what you are earning. Back in 2006, a kilo (that’s 2.2 pounds for those who don’t kow) of mangoes cost you $1.20. Today that would cost you $1.92. That’s an increase of about 62% in 7 years.
It’s not the inflation that gets you. It’s not the currency rate fluctuation. It is the combination of the two. If the currency were still worth the same as it was back then, the mangoes would cost you only $1.40, just a 20 cent difference. But, throw in the currency changes in that time, and you are paying 72 cents extra now!
Let’s look at a more extreme example. Let’s say that you have a certain brand of mustard that you really like and it is imported from the USA. As far as I know, there is no mustard that is made in the Philippines, so for this item you are required to use an imported item, there is no local substitute. Let’s say that the mustard had a price of $2 per bottle back in 2006. The value of the US dollar has gone down more than 25% since 2006, so even without any inflation at all, the price of that mustard will have gone up to $2.50 here at the very least. On top of that, factor in Philippine inflation and you will now be paying $3.20 at the very minimum. This accounts for currency fluctuation and 5% inflation per year. As you can see, these two factors play a double whammy on your wallet!
Being an expat can be expensive. Everybody thinks that it’s cheap in the Philippines. There was a day when it was, but times are changing. There is one thing to remember, though… things could swing in the other direction too someday, though. I don’t see it on the horizon, but if the US ever gets it’s economic house of cards in order, it is possible that the dollar will appreciate again. If that happens,we may see a decline in the cost of being an expat in the Philippines.