Inflation, living abroad and retirement
Rising prices are affecting everyone in varying degrees. Some retirees abroad find themselves in a difficult position. Their pension can no longer cover all of their expenses: inflation keeps reducing their purchasing power. Some, like Thierry, are faring better. An expat in Agadir (Morocco), Thierry barely feels the effects of inflation in his daily life. "We are a retired French couple living in Agadir. If we had been employees, our answer would have certainly been different. Inflation has a minimal effect on our daily lives. Our pension isn't increasing (at least for now), but as we mainly buy local products, even if the prices go up a bit, it doesn't make a huge impact on our budget."
This feeling is echoed by Alain: "If we had been employees, our answer might have been different. Inflation barely impacts our lifestyle in Spain, even if it sure makes us grumble to see some bills go through the roof, especially when it's without any good reason. Local products have only slightly increased -- mainly because of large fuel and electricity companies, for example, that are always greedy to make more money and can influence the price of local products."
But for these two retired expats, rising prices do not compromise their life abroad. "Generally speaking, things are likely to get worse internationally, but the rise in the cost of living will not make us change our minds", says Thierry." Alain shares the same views.
Inflationary pressures and soaring inequality
The cost of living has become difficult to bear for some.
"Inflation here in Bulgaria has just reached an annual rate of 16.9%," relates Gwynj. "The hike in public services and transport is markedly higher than this overall percentage. I think that this increase is quite harsh for most Bulgarians, especially as the legal minimum wage has remained at 360 euros per month. And many retirees have to get by with pensions even lower than that."
Gwynj recalls that Bulgaria is the poorest country in the European Union (EU) in terms of GDP per capita. In 2021, the GDP per capita was 17,900 PPS (purchasing power standard). Greece, Slovakia, Croatia and Cyprus are also among the EU countries with the lowest PPS. But their PPS still remains higher than Bulgaria's (20,900, 22,000, 22,600 and 28,300, respectively).
In Cyprus, "the price of petrol and goods are on the rise," explains Kyriakos. "In supermarkets, prices, in general, have increased by 20%. The cost of living is at its worst level. Cypriots are really struggling at the moment. The minimum wage is very low compared to the cost of living."
The situation is still bearable for others
Gwynj sees rising inequality between different countries and even between the residents of the same country. For him, it's not surprising that the rising cost of living is "quite bearable for fairly well-off expats" but not for others. This expat takes himself as an example, knowing that he is faring better than less privileged residents. "For example, my last water bill was 6 euros, and my last electricity bills were 30 euros (apartment) and 5 euros (house). The internet (fiber-optic cable) at home and in my apartment costs less than 10 euros at each dwelling. The property tax for the apartment is 67 euros per year. A bus trip to Plovdiv, the second largest city in Bulgaria, still costs 50 cents. I've just booked my seat to see the opera Tosca at the famous Roman amphitheater in Plovdiv, for 10 euros."
Electricity, gas... the fear of a difficult winter
Kyriakos summarizes well what's going on: "Sadly, Cyprus is a paradise only for the wealthy who settle down here. But for native Cypriots, it's a living hell." And even if people's incomes allow them to withstand inflation, the brutal surge in the cost of living still takes a heavy toll on their budgets. "We are luckier than most people here," acknowledges Toon, a resident of Cyprus, "but we just received an electricity bill that's double what we were expecting to pay. The adjustment cost for fuel is far higher than how much fuel we actually consume. Workers and families, regardless of whether they're locals or expats, are struggling."
Jean-Luc, an expat in Germany, foresees some dark days ahead in his host country. "An 8.5% hike in prices, soaring poverty, many Germans having to resort to food banks. We fear a gas shortage next winter. It would be the worst social crisis the country has ever known." Bosses are also saying it: millions of Germans risk losing their jobs, and millions of Germans risk not having heating during the winter. Jean-Luc also dreads the possibility of "very violent protests." "I use gas for heating. I can't switch to an alternative like geothermal energy. Too expensive. Besides, my boiler is on the roof, not in the basement. The only solution would be to replace my 26-year-old boiler with a new one that uses less energy. I've ordered a wood-burning stove, but I have no idea when it'll be delivered. Appliances are harder to find, and wood is harder to find too." Beppi shares the same concerns. "The cost of heating was already high before the crisis. But now this cost has quadrupled, while salaries have stagnated. The recession leaves little hope that the situation might change."
Have geopolitical tensions worsened inflation?
Crises are coming one after another, and they're putting a strain on individuals' budgets when these have already been under stress. Covid-19 has hit the entire global economy hard. Some countries are recovering more easily than others. All have to accommodate to a virus that is still circulating and to epidemic waves that jeopardize plans for economic growth. For Tom in Stuttgart, the war in Ukraine has also contributed to worsening inflationary trends. "It's by far the most important factor, and its consequences are reverberating across the global economy, the environment and social cohesion. Inflation was low for many years. This is a recent trend, mainly triggered by Putin's war and some logistical problems caused by Covid."
As the Ukrainian war endures, populations are torn between the will to continue fighting and psychological exhaustion. Some people have grown weary and are clamoring for peace. But at what price? Ukraine is the first to witness this tug-and-pull between those who want to keep fighting and those who want to end things. Yet, both sides share a common goal: end the war and resume a "normal" life. But inflation complicates everything. Not to mention other areas of geopolitical tension, like in the South Pacific, where China casts a shadow over Taiwan. And not to mention other wars without a name and territorialized threats that keep populations in an alarming state of poverty.
What are governments doing?
Fred praises the policies of his host country, Indonesia. "Here, the government has done its best to stabilize energy prices. Thanks to its policies, the cost of living crisis hasn't really been a problem here." Stumpy lives in New Zealand and says that the cost of living is increasing at an annual rate of 7.3%. It's the highest percentage ever reached in 30 years. The main causes are the rising cost of fuel, housing and food. To curb these hikes, New Zealand has raised its benchmark interest rate to the highest level. The US, Canada and other European countries have also opted for this solution. For these countries, the priority is to control inflationary surges quickly. But other countries like Japan, Turkey and China have made the opposite choice of prioritizing economic growth.
Inflation and investments
How to manage investments amid inflation? Cccmedia lives in Colombia and has noticed the impact the general price hike has had on financial investments. "I haven't personally felt the effects of inflation here in Medellín (Colombian city) or in Quito (capital of Ecuador). Nevertheless, I can see its impact on my investment portfolios, which have decreased in the context of negative market sentiment. That scared me, so I invested mostly in precious metals, royalty streams and small investments, mainly via ETFs (exchange-traded funds). All the while hoping for the best."
The economic crisis compels people to rethink their lifestyles
Is the rising cost of living urging expats to rethink their consumption patterns? "Peer pressure, linear thinking, and advertising campaigns all tell us that we need to buy an expensive house, a new car every x year, and a giant TV in order to be happy and feel part of normal society. But do we really need all of this?", wonders Fred.
In his opinion, everything is allowed, but not everything is useful. The crises of the past few years have challenged the current model of society. If capitalism is still the foundational system of many countries, its excesses and limits reveal themselves. The health crisis has made this wake-up call come earlier. Many expats and locals, like Fred, didn't wait for the surge in inflation to change their consumption patterns. Some have turned towards environmentalism. Others have focused on making savings. Yet others have decided to stop feeding the "wealthy" by shopping locally instead of from large companies. The crisis has made people rethink their priorities. Fred asks himself: "Does everything we buy truly make us happy? Why do we work harder to buy things we don't need? I could go out and buy literally anything, but would it really be useful?"
Conclusion
Will the rise in the cost of living ever stop? Expats who have responded to our questions have mixed opinions on this issue. Some believe that it will once the war in Ukraine is over. For others, it's a no. "Inflation started climbing before the Ukraine war and will continue firmly in the future." What's the solution, then? Should they move to yet another country where the cost of living is lower? Should they save or the opposite, spend more to help the economy recover? Should salaries be reviewed? One expat concludes: "We're hoping for the best and are preparing ourselves mentally for the worst. We'll try to come out as winners no matter what the future holds."
