Dubai and Abu Dhabi are among the most expensive cities in the Middle East. The cost of living has not just increased in the UAE but across the region and globe due to geopolitical tensions, and strong growth of the regional economies in the post-pandemic period.
According to Mercer's Cost of Living 2023 report released on Tuesday, Dubai and Abu Dhabi were ranked 18th and 43rd costliest cities in the world, jumping by 13 and 18 places, respectively.
Ranked 8th on the global ranking, Tel Aviv remains the costliest city in the Middle East for international employees.
The annual study revealed that prices of butter, cooking oil, sugar and other essential items basket rose by 23.5 per cent, 6.9 per cent, 3.8 per cent and 15.4 per cent, respectively, in Dubai.
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The annual study ranked 227 cities from across five continents, measuring the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods and entertainment.
Not just Dubai and Abu Dhabi, the rankings of almost all the cities in the Gulf region jumped due to the rise in the cost of living.
Among the other regional cities, Riyadh was ranked 85th (up 18 places), Jeddah at 101 (up 10 positions), Doha at 126 (up 7 positions) and Muscat at 130 (down 11 places).
“Despite climbing in the rankings, the UAE's relative cost of living remains competitive when compared with major global cities. Factors such as inflation, exchange rate fluctuations, and housing costs contribute to these changes. The UAE has been proactive in managing these issues, reflecting its strong economic resilience,” Mercer said.
It is expected that inflation in the UAE and Gulf region will drop this year. The UAE Central Bank projected that inflation in the country will decelerate to 3.2 per cent due to softer price increases in all categories, especially transport and food and beverages.
“Employers in the UAE are taking note of these changes. Our research indicates that organisations have provided an average of 4.2 per cent annual merit increase in 2023. Many of them are reviewing their remuneration packages, with a growing number increasing bonuses instead of increasing base salaries to increase the total compensation without the long-term commitment,” said Vladimir Vrzhovski, financial services and technology industries lead at Mercer Middle East.
“Our research shows that as a response, 40 per cent of the surveyed organisations have reviewed their 2023 policies by increasing their housing allowances on average by 5-10 per cent based on the career level,” added Vrzhovski.
Globally, Hong Kong once again topped the ranking followed by Singapore, which jumped six places, and Zurich. The other cities that made it to the top 10 include Geneva, Basel, New York City, Bern, Tel Aviv, Copenhagen and Nassau (Bahamas).
While the least expensive cities are Islamabad, Karachi, Havana, Bishkek, Dushanbe, Windhoek (Namibia), Ankara, Durban, Tunis and Tashkent.