Dubai and Abu Dhabi climb global cost of living rankings: Mercer
Despite inflationary pressures, UAE’s economic fundamentals bode well for growth
Dubai: Dubai and Abu Dhabi have witnessed a notable rise in their global rankings for cost of living, securing the 18th and 43rd spots respectively, according to Mercer’s Cost of Living 2023 report.
One of the key drivers behind the changes in 2023 rankings is the surge in rental costs, with Dubai being the second city, after Singapore, to experience significant rent increases averaging 25 per cent. By contrast, the impact of housing movement has been notably lower in Abu Dhabi, where the change ranges between 6-8 per cent and in some areas remains the same as last year.
In addition to rental hikes, the report identifies an increase in the cost of living across various categories in both Dubai and Abu Dhabi. Supermarket food prices have risen by up to 11 per cent, transportation by 4 per cent, and sports and leisure by 5 per cent. However, the UAE’s economic fundamentals, driven by non-oil economic expansion and wage growth, contribute to countering inflation and bolstering the country’s economic strength.
“Employers in the UAE are taking note of these changes. Our research indicates that organizations have provided an average of 4.2 per cent annual merit increase in 2023,” said Vladimir Vrzhovski, Financial Services and Technology Industries Lead at Mercer Middle East. “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 long term commitment.”
“Our research shows that as a response, 40 per cent of the surveyed organizations have reviewed their 2023 policies by increasing their housing allowances on average by 5-10 per cent based on the career level,” he added.
In general, countries and cities are continuously striving to attract international businesses as well as digital nomads and mobile employees. The most successful locations are currently those combining flexible governance for mobile talent, a high quality of life and a reasonable cost of living.
Competitive cost of living
Despite the rising rankings, the UAE’s cost of living remains competitive compared to major global cities. The changes in rankings are attributed to factors such as inflation, housing costs, and exchange rate fluctuations. The UAE has been proactive in managing these issues, reflecting its strong economic resilience.
According to the report, Hong Kong (first) retains its position as the most expensive city for expatriates, followed by Singapore (second), which climbed to the second spot. Global hubs like London (17th) and Amsterdam (28th) have dropped a few spots, while New York (sixth) has climbed up by one spot in the rankings.
Among Middle Eastern cities, Tel Aviv stands as the costliest for international employees, ranked eighth, while Cairo ranks 217th and Amman ranks 110th.
Due to the recent introduction of aggressive national monetary policies and the tightening of global financial conditions, many economies are likely to see slower income growth this year, along with rising unemployment.
Debt levels among many countries remain high and core inflation has not yet peaked in many markets. Inflation and exchange-rate fluctuations are directly impacting the pay and savings of employees who are internationally mobile.