New York and Singapore rank as the world’s most expensive cities as a result of the strong currencies and higher inflation rates globally, an Economist Intelligence Unit survey says.
Tel Aviv in Israel, which was the most expensive city last year, is now the third costliest city to live in globally, according to the Worldwide Cost of Living Survey from the EIU.
Hong Kong and Los Angeles are the fourth most expensive cities globally this year. Zurich, Geneva, San Francisco, Paris, Copenhagen and Sydney round out the top 10.
Damascus in Syria and Tripoli in Libya remain the cheapest cities, the survey found.
US cities rose up in the rankings owing to a strong dollar, while most European cities fell on the list as the energy crisis and weakening economies pushed down the value of the euro and other local currencies, said the survey, which compares the prices of more than 200 products and services in 172 cities around the world.
The index is primarily used by companies to negotiate compensation packages when relocating staff. This year’s survey was conducted between August 16 and September 16.
“The war in Ukraine, western sanctions on Russia and China’s zero-Covid policies have caused supply chain problems that, combined with rising interest rates and exchange rate shifts, have resulted in a cost-of-living crisis across the world,” Upasana Dutt of the EIU.
“We can clearly see the impact in this year’s index, with the average price rise across the 172 cities in our survey being the strongest we’ve seen in the 20 years for which we have digital data. We expect prices to start easing over the coming year as supply bottlenecks start to ease and slowing economies weigh on consumer demand.”
In June, another survey by global consultancy Mercer showed that Hong Kong, Zurich and Geneva were the three most expensive cities in the world for overseas workers.
Tel Aviv was ranked the sixth most expensive city for international workers, making it the costliest in the Middle East, Mercer said.
Prices have increased by 8.1 per cent year on year on average in 172 major cities, the EIU report said.
The EIU rankings compare cities with New York as the base city.
The most rapid price increases were for a litre of petrol, which rose by 22 per cent year on year on average in local currency terms amid higher global oil prices.
Prices for utilities such as electricity, as well as food and basic household goods, also rose rapidly. By contrast, prices for recreational goods and services were subdued as consumers focused spending on essentials, the report found.
Prices for gas and electricity were up by 29 per cent on average in local currency terms in western European cities as the region tries to wean itself off Russian energy. This compares with a global average increase of 11 per cent, according to the EIU report.
Global car prices have risen by 9.5 per cent on average in local currency terms, as supply chain blockages curtailed production and led to waiting lists in some cities, the agency said.
The International Monetary Fund predicts that global inflation will rise to 8.8 per cent in 2022 from 4.7 per cent but fall slightly next year to 6.5 per cent, while global economic growth is expected to slow.
Istanbul (Turkey), Buenos Aires (Argentina) and Tehran (Iran) experienced very high inflation in 2022, according to the EIU.
However, the highest inflation rate was in Caracas, Venezuela, where prices increased by 132 per cent since last year.
The biggest upward movers on the EIU’s list of most expensive cities were Russia’s Moscow and St Petersburg, which shot up by 88 and 70 places respectively, as prices soared amid western sanctions and buoyant energy markets supported the rouble.
Inflation in Moscow is now 17.1 per cent year on year in local currency terms, while in St Petersburg, it has reached 19.4 per cent.
Meanwhile, Stockholm, Luxembourg and Lyon were the biggest fallers in the EIU rankings.
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New York is not the only US city that has risen in the EIU rankings as a result of the strengthening dollar. Other US cities, such as Atlanta and Boston, account for six of the top 10 global movers up in the rankings.
The agency forecast that global consumer price inflation will fall from an average of 9.4 per cent this year to 6.5 per cent in 2023.
“Unless the war in Ukraine escalates, commodity prices for energy, food and for supplies such as metals are likely to fall sharply in 2023 compared with 2022 levels, although they are likely to stay higher than previous levels,” the report said.