In a recent cost of living survey conducted by global consultancy Mercer, it has been revealed that Karachi and Islamabad, the largest and capital cities of Pakistan respectively, have been ranked among the cheapest places in the world for expatriates to live in 2023. This news comes as a relief for foreign workers looking for affordable living options. However, the situation presents a contrasting reality for the residents of these cities, as inflation has been steadily rising due to the implementation of challenging fiscal measures mandated by the International Monetary Fund (IMF).
Affordable Cities for Expatriates:
Apart from Karachi and Islamabad, several other cities around the world were identified as budget-friendly for foreign workers. These cities include Havana in Cuba, Bishkek in Kyrgyzstan, Dushanbe in Tajikistan, Windhoek in Namibia, Ankara in Turkey, Durban in South Africa, Tunis in Tunisia, and Tashkent in Uzbekistan. Mercer’s survey encompassed more than 400 cities, considering over 200 components such as housing, transportation, utilities, food, domestic supplies, and entertainment to determine the rankings.
Expensive Cities Dominate the Top:
On the other end of the spectrum, Hong Kong, Singapore, and Zurich emerged as the three most expensive cities in the world. Switzerland dominated the top 10 list with Geneva, Basel, and Bern securing the fourth, fifth, and seventh positions, respectively. New York City claimed the sixth spot globally, being the most expensive city in the United States. Tel Aviv in Israel was ranked eighth, making it the costliest city in the Middle East. Copenhagen in Denmark and Nassau in the Bahamas rounded off the top 10.
Challenges for Global Economy:
Mercer’s survey highlighted that due to the recent introduction of aggressive national monetary policies and tightening global financial conditions, economies are likely to experience slower income growth and rising unemployment. High debt levels and core inflation in many markets continue to impact employees’ pay and savings. The report also identified factors such as the Russia-Ukraine crisis, the emergence of more contagious COVID-19 variants, exchange rate fluctuations, and widespread inflation as contributors to the volatility in expatriate salaries and savings.
Middle East Inflation Trends:
According to the International Monetary Fund’s Regional Economic Outlook on the Middle East and Central Asia, inflation in the region is expected to drop to 4.9% in 2024, down from its peak of 8.7% in 2022. The Organisation for Economic Co-operation and Development (OECD) adjusted its outlook for headline inflation to 5.9% in 2023, with an increased forecast for core inflation at 4%. Inflation is projected to gradually moderate in 2023 and 2024 as central banks raise interest rates to control soaring consumer prices resulting from Russia’s invasion of Ukraine.
Expatriate Costs in the Middle East:
Dubai climbed to the 18th spot from 31st last year, while Abu Dhabi rose to 43rd from 61st in Mercer’s ranking of most expensive cities for expatriates. Mercer attributed these changes to significant rent increases in Singapore and Dubai, with rental costs in the latter rising by an average of 25%. However, the impact on housing costs in Abu Dhabi was relatively lower, ranging between 6% and 8%. Employers in the UAE are adapting to these changes, with many opting to increase bonuses rather than base salaries to enhance total compensation without long-term commitments.
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Regional Rankings and Beyond:
In the Middle East, Riyadh and Jeddah in Saudi Arabia were ranked 85th and 101st, respectively, while Manama in Bahrain secured the 98th position. Other notable cities included Amman in Jordan (110), Doha in Qatar (126), Muscat in Oman (130), and Kuwait City (131). Alongside the Swiss cities and Copenhagen, other expensive European cities included London, Vienna, Amsterdam, Prague, and Helsinki. Asian cities like Shanghai, Beijing, Seoul, Tokyo, and Shenzhen, as well as Los Angeles, San Francisco, and Honolulu, also made it to the top 20 most expensive cities, according to Mercer’s findings.
As the global economy navigates uncertain waters, the impact of inflation, exchange rate fluctuations, and geopolitical tensions continues to influence the cost of living for expatriates across the globe. The findings of Mercer’s survey shed light on the challenges faced by both foreign workers and local residents, highlighting the need for careful economic management and adaptation in the face of evolving financial circumstances.
