Evaluating the Offshore Situation

Whether you’re considering a move for yourself or an offshore move for your banking needs, it’s good to check in on how different countries are doing.

July 18, 2022

By: Bobby Casey, Managing Director GWP

offshore nomad Regardless of whether you are settled in one place, considering expatriation, or a nomad, it’s important to track the economic conditions of where you are and where you plan to go.

As we’d mentioned in an earlier blog, one of the best advantages of offshore banking is safeguarding against possible instability in a country you’re in. If you need to have an account in a less stable country, that doesn’t mean you need to keep it all there. You can have some money in more stable areas of the world, too.

The whole world is experiencing hardship right now. The global economy is struggling, and everywhere you look it seems something is stirring. We mentioned Sri Lanka and Holland last week, but the UK recently saw Boris Johnson step down, and Italy is seeing political unrest as well.

Italy’s Mario Draghi offered to tender his resignation after losing political support from Five Star. The President Sergio Mattarella refused it. But without the support of Five Star, little can be done.

People understandably are frustrated, anxious, and angry with the economy right now.

I read this somewhere and I think it applies:

We are all in the same boat. No. We are all in different boats on the same sea.

We are experiencing different effects depending on where we are and of course what our respective jurisdictions are doing economically.

It’s not about how rich or poor the country is. It’s the annihilation of their stasis. Sri Lanka isn’t nearly as wealthy as the Netherlands, but both are spitting nails at their way of life being turned in its ear.

Some economies are coming close to default even! Bloomberg did an analysis of 50 countries. Of the top 25 at-risk countries, 8 of them are Latin American countries, and El Salvador tops the whole list.

El Salvador isn’t even close to having the largest debt to GDP ratio in the world. In fact, Japan holds that title at 257%. This is in large part due to them being the first developed country to dive into ZIRP (zero interest rate policies). That super charged the economy by super charging borrowing… put another way, it super charged debt.

Japan’s been doing this since the 90’s.

El Salvador, all in, is around 88% debt to GDP. What puts it at risk is its interest to GDP. They are at 4.9%. Contrast that with the US at 1.6%.

The next date to watch will be January 2023, as this is when the country’s $800 million sovereign bond reaches maturity. Recent research suggests that if El Salvador were to default, it would experience significant, yet temporary, negative effects.

It has a young PM who made Bitcoin legal tender. With BTC down 56% YTD, it is difficult to say if this will be a net help or hindrance for the struggling Central American country.

While banking in volatile countries is inadvisable, from a nomad’s perspective, looking for a place where your currency goes further than it does at home is the key.

This is a great interactive chart that allows you to look at the cost of living index as well as the local purchasing power using New York city as a base. If you layer in safety considerations and digital nomad visa opportunities to this, you could find your next destination (or affirmation that your current location is better than you thought!).

Several South American and Southeast Asian countries popped. Malaysia is particularly interesting. It sits alone on this chart with very low cost of living and very high local purchasing power. They have a unique offering for Tech Entrepreneurs, that extends their allowable stay from one to five years.

Indonesia is a nomad favorite, and rightly so! We’d recently done a blog dedicated to its new digital nomad opportunity.

Bali: 42.9 Cost of Living/14.1 Local Purchasing Power Index

Jakarta: 40.9 Cost of Living Index/25.3 Local Purchasing Power Index

Bali has a CoL that is 57.1% lower than New York’s but has a purchasing power that is 85.9% lower than New York’s as well. Jakarta has a CoL that is 59.1% lower than New York’s but has a purchasing power that is 74.7% lower than New York’s.

But if you take New York income to a place like Bali, then your purchasing power is incredible.

Finding a place with a low cost of living, but where you can leverage your purchasing power to make your money go further.

If you are in the states and looking for a more affordable place, this is also helpful. Whether you’re living that RV life or Vrbo hopping around, this could help you figure out your next move!

If you recall, we did a few blogs that tackle this: Digital Nomads: Where to Next? and A Few Tips for US Domestic Nomads.

You might be able to not only leverage lower cost of living and higher purchasing power, but other incentives offered by some destinations.

No matter where you go, or where you decide to bank, it’s a multilayered decision with myriad factors involved. I just hope to impart some data and other more objective considerations so you can make the best decision with the best information available.

Click here to get a copy of our Offshore Banking Report, or here to become a member of our Insider program where you are eligible for free consultations, deep discounts on corporate and trust services, plus a wealth of information on internationalizing your business, wealth and life.

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