Currency gains hurt expatriates

Dubai: The surging Indian rupee and Philippine peso are hurting the earnings of two leading expatriate groups in the UAE, making the country a less attractive employment destination than it once was.

The Indian currency, which rose 12.3 per cent in 2007, may appreciate further on higher overseas inflows as foreign investors try to take advantage of high-yielding domestic assets.

The rupee has gained 0.2 per cent after the US Federal Reserve cut its key interest rate to the lowest since 2005.

The unexpected cut in the US interest rate is likely to increase capital flows to India and the rupee is likely to surge further if the central bank does not intervene and cut the rates to cool the currency market. The Philippine peso, Asia's best performing currency in 2007, gained about 19 per cent last year.

The peso is projected to gain in the range of five to 12 per cent against the dollar this year as the central bank is unlikely to intervene in the market.

Forecasts

Citigroup forecasts a nearly 12 per cent rise in the peso to 37.4 per dollar by the end of 2008 and HSBC is even more optimistic with a forecast of 37.2.

The declining dollar to which the dirham is pegged and about 10 per cent domestic inflation have hurt the earnings of most expatriate groups working in the UAE.

While the euro zone expatriates have suffered an estimated purchasing power loss of about 20 per cent, the UK expats lost about 12 per cent last year.

Trend: Wage gap narrows

A substantial wage gap that existed between the UAE and India that attracted Indian professionals to work in the UAE is on a decline that could result in more Indians opting for opportunities back home.

The overall wage gap between the UAE and Indian salaries is projected to decline by six per cent in 2008 from that of 2007. According to data compiled by Hay Group, supervisory level gross salaries were 88 per cent higher in the UAE compared to India in 2005, but they declined to 75 per cent in 2007 - and the consultancy is forecasting a further drop to 70 per cent in 2008, driven in part by the rising rupee.

The decline is also expected to affect the difference between executive level salaries, which dropped from 78 per cent in 2005 to 62 per cent in 2007, and could go down to 59 per cent this year. However, the steepest fall of 18 per cent is likely to be seen at the middle management level, where the UAE salaries used to be 86 per cent higher in 2005.