Will Europe fall into a recession?
Expats are divided over this question. For some, it's the “beginning of the end,” or rather “the Covid aftermath of Covid,” and they don't have much hope for the future. “We've been on life support for two years now,” says an expat who works in Greece. "For far too long, as a matter of fact. Yes, it's a recession.” Others believe that no thought is being given to expats with small pensions and small incomes. "How will we survive?” Yet, some remain optimistic: “Politicians like scaring us, but we're not going to die of the cold.” But who are those who will manage to keep themselves warm throughout winter? How many expats feel left aside by the economic crisis?
The latest PMI Index of S&P Global is quite alarming. This American corporation specializing in financial analytics has published the latest figures about the Eurozone's economic activity. Economic activity has shrunk again in August, following the July contraction. The index is at its lowest level in a year and a half (49.2 points). The main driver of this economic downturn: is difficulties experienced by the French and German manufacturing sectors, which are plummeting while manufacturing is growing slightly in other countries.
But the problem is more global. No one thought that the Ukraine war would last for so long. The Russian president is making things more complicated for other countries regarding gas supplies. European countries are stocking up on gas for winter (about 80% of this stock will have been met), but it's uncertain for how long this will suffice. And the prices are another issue. Some companies are already limiting their production because of the soaring energy cost. Expats and locals both fear a spike in their gas and electricity bills, which will bring about a new drop in purchasing power.
Will expats be able to keep themselves warm this winter?
Jean-Luc, an expat in Germany, shared his views on the Expat.com forum: “My gas contract has changed. Before, the price was fixed for one year, but today it only lasts for 3 months. It has gone up from 112 euros to 160 euros since August 1.” Fvernez, an expat in Bulgaria, has also observed a spike in energy costs: “According to the consumption index, inflation stands at 17%. But I've noticed that in reality, it's actually 25-30%: gas costs 80% more, electricity costs 3 times more and firewood 3 times more.”
Many expat workers find themselves struggling to make ends meet. Milki di Fiore talks about her boyfriend who lives and works in the United Kingdom. “It's staggering: as if Brexit and 2 years of Covid weren't enough. My boyfriend's electricity bill skyrocketed (from 60 to 130 pounds, that is from around 70 to 153 euros), and they're expecting another hike at the start of 2023.” Milko di Fiore fears that there will be more large-scale protests. The United Kingdom is passing through one of its greatest social crises. In June, thousands of people protested against the rising cost of living in the streets of London. These days, dockers, rail workers, postal workers, lawyers, garbage collectors, telecom staff, and many others are striking to protest against the loss of purchasing power. Inflation rose above 10% last month. Already overwrought by the mistakes of the British government, the population clearly doesn't need one more crisis. Elsewhere in Europe, people are urging their governments to take prompt measures.
Which European countries fare better?
Today, purchasing power is clearly a key factor to consider when moving to Europe. In July, the annual inflation rate in the Eurozone was over 8% (8.9%). Estonia has the highest inflation rate (22.7%). Latvia, Lithuania and the Czech Republic also have inflation rates over 15%. In Poland, the Netherlands, Belgium and Greece, inflation rates range between 10 and 15%, and it's 9.4% in Portugal, 8.5% in Germany and 7.9% in Finland. France and Malta have the lowest inflation rates in the region: 6.8% and 6.5%, respectively. But in December 2021, these rates were twice as low. This is a worrying situation for global leaders and prospective expats, regardless of their income bracket. The threat of a recession is looming closer and closer. How is this going to affect expat life?
To move or not to move?
Marie and Pierre are an expat couple seeking information and advice on the Expat.com forum. “We will retire in 2023, and after many trips to Portugal, we wish to settle down there". Régis is also retiring in 2023 but in Spain. Despite the economic crisis, Portugal and Spain remain the top destinations for retiring abroad.
That is especially true for Portugal, which attracts expats from far beyond Europe's borders. Californians find that the country has all the qualities they could dream of, and many choose to relocate there. According to the Portuguese Immigration and Border Service (SEF), 6921 Americans relocated to Portugal in 2021, compared to 4768 the previous year. This increase of 2000 expats in a year is quite impressive despite the prevailing pandemic. Inflation doesn't seem to alter their expat plans, at least for the time being. Those relocating abroad like the Portuguese lifestyle, which is very similar to that of California but much more affordable.
In Portugal, everything costs about 40% lower than in California. Americans make the best of the favorable Portuguese tax system and visa policies. The country still has a golden visa program, despite the pressure from the European Commission. These expats, whether they are retired or not, also have the means of investing in property in Portugal. However, some neighborhoods have become unaffordable for locals. Real estate prices are soaring, and the far-right is gaining more power. All of this affects Portugal's image as an idyllic destination.
Prospective expats who are worried
Bart works in the restaurant sector and has been looking to move to Italy. “This project cropped up during Covid,” he says. Bart is learning Italian and would like to study further. “It's not that easy when you're 35.” Although he has work experience, he wants to perfect his skills by acquiring new diplomas. However, the budget he has set aside for traveling is no longer enough. And his heart isn't into it anymore. “It's no longer as exciting. There are strikes and poverty everywhere, not to mention the far-right in Italy. I didn't really care about all that before, but things have changed. I think I'll stay in France for the time being, even if it's not that great."
Nathalie, on the other hand, is still holding on to her moving to Spain plans. To be practical, she wants to choose a region where it will be easier to find a job. She's seeking advice on the Expat.com forum: “ What are the regions I should avoid, those I should favor, what about schools, work, things to do in your free time, etc.?” Alex is planning a move to the Netherlands in 2023. “I have a good deal of experience in the restaurant sector and in the service industry, in general, plus I have an advanced technical diploma in operations management.” But like Nathalie, Alex is also worried about current career prospects. “Is it easy to find a well-paid job and affordable housing? What's the cost of living like?”
“Governments should not forget expats who are less well-off!”, reminds a retired French couple in Greece. Since Covid, the number of struggling expats has been on the rise. Pensions have not been upgraded in line with inflation and the rising cost of living. Many Swiss retirees have left their country to escape poverty. Their pension didn't seem profitable in Switzerland, but it was enough to live well in France or the Czech Republic. But the threat of an impending recession is making their expat life more complicated.
The future of expats in Europe
Prospective expats are weighing the pros and cons more seriously than ever. Crises are following one another, and companies aren't always able to stay on track, as evidenced by expat entrepreneurs who are being forced to close their businesses. While many of them are likely to start from scratch in another country, it's uncertain when they will be able to do so. “It's hard when you have a small business. Subsidies or allowances are not enough, and they don't last forever.” According to experts, the only real solution is a global return to normal, and this would include the withdrawal of Russian forces from Ukraine and the resumption of smooth economic exchange.
