In my day to day life in Davao, I talk to a lot of expats. A lot of my friends are expats, and I usually end up meeting other expats if I am out and about. Because of this interaction with so many other expats, I can generally get a pretty good read of the pulse of the expat community here.
In recent days, I have been hearing the same thing from almost every foreigner that I talk to. They are all telling me that economically it is getting difficult for them. I have heard from some expats that are even thinking of going back home because they can’t afford to live here anymore. Others are searching for new ways to make some extra money. Still others are not sure what to do, they only know that their wallet is not nearly as full as it was a year ago, or so.
Why are so many people complaining of this? Well, the primary reason that I have been told is that the decreasing value of their currency against the Peso is making life difficult. Americans are hit the hardest, it seems, because the Dollar has taken a nose-dive against the Peso for a couple of years now. But, other nationalities are being hit too. The British Pound is nowhere near where it was against the Peso just a year ago. Basically, nearly every foreign currency is down compared to where it was at this time in 2007.
For anybody who has a fixed foreign currency budget, that means that in Peso terms, they are now having to put up with less than they used to.
There are other factors too, though, in addition to the falling value of foreign currencies against the Peso. As I have pointed out many times here, Inflation is extremely high in the Philippines. Food in particular has been hit with hyper-inflation in the past year or so. Look at rice right now, we are seeing prices rise by up to 20% per week! That cuts into a budget quickly, especially when you figure that rice is one of the major foods that must be purchased to feed the mouths in your household.
When you combine high inflation with a devaluation of your currency, you are getting shorted on each end of the process, and it doesn’t take long to feel the pinch.
For some of us who are in business, the poor economy in the USA is starting to affect our business, and we are seeing a downturn in sales and profits. There is a saying that seems to be so true:
When America sneezes, the whole world catches a cold.
Factor in all of these things, and living in the Philippines is not quite as easy as it was just a year ago. It seems that a number of expats are just now waking up to the situation and taking note, because in recent days and weeks, it is a theme that I hear almost every time that I meet with or talk to a foreigner who lives here!
Just remember, everything is cyclical. As time passes, the pendulum always swings back to the other side again, and keeps swinging both ways. Find ways to capitalize, regardless of which side the pendulum happens to be on at the time. You can do it, if you think outside the box.
photo credit: aquino.paolo
Interesting observations. I hadn't been tracking the Pound/Peso rate. We US dollar guys are not alone in the lion's den, then 😉
here's why that "America Sneezes" saying is very true. For whatever reason, many major marklets … especially gold and oil are denominated in and traded in US dollars. I have aFilipino brother-in-law whose an executive in a Filipino gold mining firm. I asked him if his company was prospering lately with the strong peso. The answer surprised me …
"Actually, Dave, we are hurting, becuase even though the world precious metals price is actually set by the London Gold Fix, it's all denominated in dollars, so it has to rise more thna 20% before we get back to where we were a year ago."
Oil suffers the same fate … $120 a barrel oil is cheaper in absolute terms that $100 oil _if_ you could buy it with the same dollars as when oil was actually _at_ $200 … so producers like Saudi Arabia feel a big bite (even though we common folks don't much care about an oil sheik's finances).
Not planning any moves, though, unless someone shows me someplace where I'd be significantly better off.
Hi Dave Starr – The Pound Sterling used to be over P100:1, and now it is hovering somewhere in the 80's, I think. I have been told by several Brits that they have taken about a 20% hit on their currency.
You are exactly correct when it comes to Philippine companies, many of them earn their money in US$, so they are taking a hurting right now too. Especially exporters, who have contracted their prices a long time in advance, and in US$.
Another sector that is hurting badly is the families of OFW's who are usually paid in US$. When they send their money home now, it results in a lot fewer Pesos than it did a couple of years ago!
Can you still live very well on $1000.00 a month? Also, I will be arriving in CDO in July and be there for 27 days, will be taking a 3 day trip to Davao sometime while I am there. Going there with my wife and our 3 kids. My plan is to retire there in the future(10 to 15 yrs) I am 41 now. I believe this will be achievable with a bankful of cash, pension and then maybe social security when I reach that age. Not counting on Social Security though.
Hi Bob,I recently read somewhere that the Phils gov expects the peso to settle at P38 to the $ by the end of the year,seems it will get a little worse before it gets better.Seems the world is in a mess at the moment.
Hi Robert G – I personally do not feel that you can retire comfortably for $1,000 per month any longer. However, all of us live different lifestyles, and have different preferences. I know that I could not live on that amount, but you or others may find that comfortable. It also depends on how many people you are counting on… will your 3 kids be part of the package when you move here? If so, you certainly cannot make it on $1k per month. Sorry to say that.
Hi chas – They are talking 38/1 by the end of this year, and 30/1 down the road. That would hurt. So far, this year, though, the Peso has been going the other way, although only to a small extent.
Hi All, I spoke with a friend of mine who is in the FOREX business and yes we should prepare for 30:1, the US dollar is sliding and probably wont recover until after their election, sadly most currencies are tied to the USD, even the HKD is pegged to the USD. His only word of advice was to invest in the Euro and Yen as back up. I get paid in Canadian dollars so I am not as worried. What hurts me more is the OFW money is not going as far. Oh Buhay
I'd love to think outside the box Bob …but they foreclosed on it last week!!!
My only concern is if the dollar devalues to the point where the major holders of USD ( China, Spain, Mid.east,ect..) decide to dump it for something else…if just one major holder decides to dump, the rest will follow so as not to be the last one holding worthless paper. I doubt this will happen but the Feds are dancing with the devil right now and the potential exists. Many friends of mine have exited out of the market and into gold including myself.
Hi John D – I hope your friend is wrong, although I have been hearing the same news myself. If the Peso goes to 30 against the Dollar, there will be a lot of expats that will end up having to leave the Philippines, I think. It won't be good for expats here, that is for certain.
Hi brian – Yes, there have been rumblings of some Middle Eastern countries moving to Euros for oil and such. That could start a stampede away from the Dollar, as you say. 😯
I'm having trouble understanding how the expats will be better off leaving the country for the US, unless they plan to work and/or have room & board allowances. The dollar is buying less everywhere including here. It's still cheaper to live in the Philippines then the US and if you are on a fixed income that is not going to change.
Hi Randy C – The key would be that the expat could go back to the States (or whatever country he hails from) and get a job. Finding work here is not an easy chore. For somebody who is entrepreneurial like I am, the Philippines can be a great place to work from. For somebody who must rely on finding a job from an employer, the Philippines is no place to be. Yes, prices are increasing everywhere, but at least getting work will improve a man's situation.
Thanks for the clarification, Bob. That scenario does equate for me, as I'm well aware of the difficulty in finding work there especially as a foreigner. But I hope they realize with the recession going on, jobs are being cut daily. It isn't pretty situation here either but obviously the odds of finding a job here are still greatly in their favor.
I don't know about other countries, possibly the situation is better with regards to employment.
Hi Randy C – When it comes to earning an income in the Philippines, I have a few words of advice for people (I am not really talking to you, just relating this based on your comments):
For a person who does not have adequate assets or an existing income that came move with them, it is best to just stay in their home country, unless:
1. They get a job here before coming. This would be something like a multi-national company that offers jobs here to foreigners. This, however, is quite rare these days.
2. They are entrepreneurial and can make their own job/business anywhere in the world.
3. They have the ability to make a living online.
For those who expect to come here and find a regular job, like a 9 to 5 type setup, they can basically forget that. If they do find something, they will basically be working for local wages, which most foreigners will not do.
"Think outside of the box", sounds good. Examples? Is this leading to something? : )
Hi Arto – Ha ha… thinking outside the box is a major mantra in my life. I often tell people that I don't have a box anymore, because I spent so much of my time thinking outside that box that I just ended up abandoning my box altogether. Frankly, if I do have a box (I guess we all do), my box is so large now that it encompasses a lot of thoughts that are very unconventional!
Yes Bob some uncertainties definately for ex – pats because of the wild fluctuation in currencies, plus inflation but shared like you say by OFW and recipient families here in the Philippines and also by the locals becaue of higher prices, particularly on fuel and rice which impacts on everything and everybody here.
i have seen rice queues for govt subsidised rice that i have never seen before, reports on the tv from manila show problems of close to crisis proportions
i can not understand how Filipinos stay so calm and happy under all this pressure, we ex-pats must learn from this, what is the expression in Filipino, i think it is Bahala Na, Ann is with me now, i could check but she is busy, i think you know this one
good luck to all the people introuble with finances or anything else
I guess I someone actually believed that it will be 30Peso/Dollar in the near future, it would pay to covert most of your saved dollars to Pesos now.
Hi Bob. I appreciate you having to revisit this economic situation from time to time. What's going on in the U.S. affects the Philippines directly or indirectly.
House foreclosures in the U.S are accelerating right now. Is this the peak? I don't think anybody knows. Even the Fed has lost credibility on this issue.
I friend of mine is dumping his condos in Costa Rica. Europeans are buying them like hot cakes over there he said. But I can sense some panic in him. This subprime thing is now worldwide. I read that some parts of India and China the real estate prices are collapsing.
Anyway, it's time to short steel and copper and even oil.
Everybody hates the dollar. I think it's a contrarian sign and therefore I still think that it's time to load up on the greenback and short on the Euro 😉 .
The U.S. is first to devalue everything right now and the U.S. economy will be the first to be on the mend in the future and hence the Philippines' too, while the rest of the world will be in recession two years from now.
Then again, who knows. This is some trying times indeed.
I did not see any comments from women of the Philippines, or your wives in that matter. Gentlemen, they can help you! Remember the saying, "in every powerful man, there's an equally powerful woman behind him." 🙂 (I've been watching John Adams series)
They may come up with ideas to generate more income for the household such as taking a partime job in a hospital, driving a neighborhood's children to the schooll etc. How about bartering services? Or, letting go some of the "excess" helpers? Or, ask those ones who want to stay to grow vegetables in the backyard?
Maybe I am just rambling, but I feel like the wives would understand that this what we call marriage – partners in all endeavors. 😀
Are local businesses run by foreigners begining to feel the effect? ie restuarants etc as expats start to leave? and or spend less money on nights out etc. I would of thought there will be/is a knockon effect going to start happening if not already. It must be hard for families there relying on remitance from OFWs as they will be sending home 20% less in real terms. There is some places in the world that have seen food riots, any sign of this happening in the Philippines yet?… worrying times..
Wow, as usual, Bob draws commenters with good comments. A couple quick nites:
To those who post 'waht the Philippine government says the rate will be' predictions. The Philippines government does not _know_ where the peso will be in 6 months or a year. Neither does any other country or person. The US dollar is weak and until the US starts earning more that it is spending all bets are off. I would be very loathe to convert all my dollars to pesos. There are many currencies stronger than the dollar which are more likely to remain strong. Currency trading is high risk and demands specialized knowledge, not reliance on the views of political appointees … or guys who comment on blogs 😉
In my view a family of 5 can not come close to living comfortably on $1,000 USD … especially when the children are of school age … prices of food and fuel are rising rapidly … and tuition? Wow!
Hi rick b – Nice comment. Yes, it amazes me how Filipinos retain a sense of calmness and resignation in the face of adversity. It indeed is a trait that many of us could do well to learn a bit of.
Hi Joe Parisi – Personally, I feel that it would be rash, and too risky to convert all or most of your US$ into Php at this time. Nobody knows for sure what the currency markets will do, and one could easily get burned by such a move. Diversity is always the best goal, in my opinion.
Hi Dr. Long – I really hope that you are correct in your assessment that the thinking on the US$ is contrarian, and that the Dollar will actually move in the opposite direction. Nothing would make me happier!
Hi MarcelinaWW – I totally agree! Every marriage is a partnership, and the lady can offer some really good advice during hard times, and also during not-so-hard times as well! No doubt in my mind!
Hi Graham – I do think that such businesses are starting to feel the pinch. Last week, I was at a restaurant and talked with the foreign owner at length. He told me that the food prices are really starting to pinch him, because of the rapid increases. We didn't talk about any drop in business, so I am not sure on that part.
Hi Dave Starr – Thanks for your follow up comment. Yes, the comments on this site are generally very insightful and enlightening. There is good information available in them!
Hi Bob, even here in the States, inflation has become more than an irritation. When I got here I was amazed how cheap food was. Like most newly arrived Filipinos, I over shopped for food. Now prices have gone up. Sending money to the Phil (just friends, no family there) is really a challenge bec I know that a $100. there would't last.
Hi Roy – Very true, P4k doesn't go too far these days! I can't believe that, when comparing to 8 years ago when I moved here!