Tel Aviv in Israel ranks as the world’s most expensive city as a result of its soaring currency and rising prices for food and transportation, according to an Economist Intelligence Unit survey.
The city is up four places from last year, while Paris, which shared the top spot with Hong Kong and Zurich in 2020, is now the second costliest city to live in globally, alongside Singapore, according to the Worldwide Cost of Living Survey from the EIU.
Overall, top rankings are dominated by European and developed Asian cities, while North American and Chinese cities remain moderately priced, according to the survey, which compares the prices of more than 200 products and services in 173 cities around the world. The index is primarily used by companies to negotiate compensation packages when relocating staff.
In June, another survey by global consultancy Mercer showed that Turkmenistan's capital Ashgabat, Hong Kong and Beirut are the three most expensive cities in the world for overseas workers.
Damascus (Syria) and Tripoli (Libya) are among the cheapest cities in the world, according to the EIU.
“Supply chain problems, as well as exchange rate shifts and changing consumer demand, have led to rising prices for commodities and other goods,” according to the EIU report. “The most rapid increases in the WCOL index were for transport, with the price of a litre of petrol up by 21 per cent on average.”
The inflation rate of the prices tracked by the EIU is the fastest recorded over the past five years. Inflation has accelerated beyond the pre-pandemic rate, rising 3.5 per cent year-on-year in local currency terms in 2021, compared with an increase of just 1.9 per cent in 2020 and 2.8 per cent in 2019, according to the EIU.
Inflation in advanced economies is forecast at 2.8 per cent this year, while it is projected at 5.5 per cent in emerging market and developing economies, the International Monetary Fund said in its World Economic Outlook in October. Global food prices have increased nearly 40 per cent since the start of the pandemic, presenting serious implications for low-income countries, according to the fund.
The EIU rankings compares cities with New York as the base city.
Of the 10 categories in the WCOL index, transportation registered the biggest price increases, with index scores rising by an average of 3.8 points, according to the survey.
Prices also rose strongly in the recreation, tobacco and personal care categories. Increases in food prices have been more moderate, while the average index score for clothing has fallen since the last edition of the survey.
Iran's capital city Tehran climbed the most in the WCOL rankings, jumping 50 places from 79 to 29. The reimposition of US sanctions on the country led to continued shortages of goods and rising import prices, according to the EIU. The price of the EIU’s basket of goods and services for Tehran has risen by 42 per cent in local currency terms since November 2020.
Iceland's Reykjavik also jumped 21 places in this year’s rankings to 35th, as prices increased in multiple categories.
Caracas in Venezuela registered a 1,766 per cent increase in prices due to hyperinflation, the EIU said.
Meanwhile, Rome registered the biggest drop in the rankings, sliding to 48th place from 32, with a particularly sharp price decline in its shopping basket and clothing categories.
Bangkok and Lima are the second-biggest movers down the index rankings, with significant declines in all categories, the EIU said.
Most American cities slipped in the WCOL index rankings thanks to government stimulus injected into the economy during the Covid-19 pandemic, the EIU report said. This held down the value of the US dollar compared with European and Asian currencies.
However, New York remained the sixth-most expensive city globally and the costliest city in the US.
Supply chain problems, as well as exchange rate shifts and changing consumer demand, have led to rising prices for commodities and other goods
“Over the coming year, we expect to see the cost of living rise further in many cities. Inflationary expectations are also likely to feed into wage rises, further fuelling price rises,” the EIU said.
The agency forecast that global consumer price inflation will average 4.3 per cent in 2022, down from 5.1 per cent in 2021, but still substantially higher than in recent years.
“If supply chain disruptions die down and lockdowns ease as expected, then the situation should improve towards the end of 2022, stabilising the cost of living in most major cities,” the report added.