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Expat Investor : September October 2009
INTERVIEW September/October 2009 EXPAT INVESTOR 17 Credit crunch hits expats where it hurts HSBC Bank International's latest research reveals that the current economic crisis has had a significant impact on expats' financial situations. Expat Economics shows that expats have reduced spending across the board, with the UK and US identified as having the greatest number of expats considering a move home. Now in its second year, Expat Explorer surveyed over 3,100 expats from more than 50 countries and is the largest survey of its kind. This report concentrates on expats' economic quality of life which is determined by four main economic factors: annual income in excess of US$200,000 a monthly disposable income in excess of US$3,000 an increase in saving while living/working abroad (in their current country of residence) having at least two luxury items in the country they live in. Paul Say, Head of Marketing and Communications for HSBC Bank International, said that this year's survey revealed interesting insights into a dynamic segment of the world's population, and also stands as a key indicator into how expats had been affected by global economic events. "As the world continues to undergo a significant economic shift, we are seeing some interesting patterns amongst the expat population, particularly in the changes to their spending habits. "Despite expats in the UK and US considering a move home we also found that the majority of expats are staying put despite growing employment uncertainty across many regions." The crunch and its effect on expats Overall, expats in the US, Thailand and South Africa have been most affected by the credit crunch, reducing their spending on essential and luxury items, general household maintenance and the money allocated to savings and investments. The largest reduction in essential day-to-day items was seen in Spain, where almost two-thirds (81%) of expats have cut back. Almost four- fifths of expats in the US (79%) and three quarters in the UK (75%) have also scaled down their spending on essential day-to-day items. Not surprisingly, almost half (44% -- the highest recorded figure in the survey) of expats in the UK and close to a quarter (23%) of expats in the US are considering returning home in light of the current financial crisis. This provides a stark contrast when compared to the average of only 15% of expats overall who are considering the same move. Emerging markets best for expats' finances Tw enty-six countries now feature in the ranking table (compared with 12 last year), with Russia (1st place) scoring highly as a result of the number of expats saving more, high annual salaries and the amount of disposable income available. Qatar (2nd place) and Saudi Arabia (3rd place) also scored highly in the areas of increased savings and disposable income, however they had their scores affected by lower annual salaries. Interestingly, two- thirds of expats in Qatar (63%) said that their attitude to spending had not changed as a result of the economic crisis. Geographically, Switzerland and the UK ranked 1st and 2nd respectively for Europe, with Qatar and Saudi Arabia leading the charge in the Middle East, Russia and Hong Kong top for the Asia-Pacific region and Mexico and the United States highest in the Americas. An increase in saving Many expatriates have taken advantage of their current location to increase the amount of money allocated to savings. Expats in the Middle East are strong savers, with the UAE ranking fifth (after Saudi Arabia, Russia, Qatar and India) as a country where expats are increasing their savings. Expats in the UK were the worst savers/investors globally, with over a quarter of expats living in the UK (27% -- the highest recorded in the survey) saying that they had reduced their savings and investments when compared to their home country. Savings accounts are the most popular way to save for expats across virtually all markets, with the exceptions of Mexico, Malaysia, Japan and South Africa. Where are the wealthiest expats? Asia is home to the highest paid expats in the world, with one in four expats (25%) earning more than US$200,000 per year. Individually, the survey identified Russia, Japan and Qatar as home to the wealthiest expats, defined as an annual income in excess of US$200,000 and a monthly disposable income in excess of US$3,000. Over one-third (43%) of expats surveyed in Russia, 40% in Japan and 22% in Qatar answered that their annual income was over this US$200,000 mark. Belgium and Australia are home to the least wealthy expats, with almost two-thirds (61%) of expats in Belgium and 63% of expats in Australia stating that their annual salary was US$100,000 or less. This compares to an average figure of 35% across all expats surveyed. More disposable income and an increase in costs Almost three-quarters (74%) of expats surveyed said that they have more disposable income than they did living in their country of origin, except those living in France (47%) and the UK (47%). Almost all expats in Qatar (94%), Russia (97%) and Saudi Arabia (98%) have more disposable income than they did living in their home country. More expats in these countries also have more than US$4,000 (70%, 59%, 52% respectively) of disposable income each month compared to the survey average of 36%. Food and accommodation has seen the largest increase in spending for expats, a continuing theme from the 2008 Expat Explorer report. Expats in the UK spend more of their income on accommodation than in anywhere else in the world, with almost two-thirds (86%) ranking it as their greatest expenditure, a continuing trend from the 2008 report. "There is no doubt that we have seen some interesting trends in terms of how expats are reacting to the credit crunch, but what is also interesting to see is that they remain to be a wealthy group of individuals. Over half of the expats surveyed are actually earning US$100,000 and over -- no mean feat particularly in the current climate," concludes Mr Say. HSBC's Expat Explorer survey reveals that expats have reduced spending across the board, as this report illustrates.