Dubai and Abu Dhabi Become More Affordable
Dubai and Abu Dhabi became more affordable this year, as the cost of living declined due to a drop in oil prices and deflationary pressure.
Abu Dhabi moved 10 places down from the 43rd to 53rd position in The Economist Intelligence Unit’s latest Worldwide Cost of Living Index 2020, while Dubai slipped from the 58th to 66th position.
“The key reason behind the reduced cost of living in the UAE was the decline in oil prices. Due to the plunge in global crude prices, the UAE has been facing deflationary pressures. This has affected the shopping basket of the consumer and the clothing sector,” said Upasana Dutt, head of Worldwide Cost of Living and Liveability Index at The Economist Intelligence Unit.
She said that the price trends in the UAE are not likely to see a further downward trend as oil prices recover moderately, though she expects a still subdued consumer sentiment in 2021.
Tel Aviv is the most expensive city in the Middle East and North Africa (Mena), as the cost of living in the Israeli capital jumped in 2020. Tel Aviv rose two positions to the fifth ranking in the list of most expensive cities. Ranked 27th, Amman was rated the second costliest city in the Mena region, rising 10 positions in EIU’s cost of living index.
Anurag Chaturvedi, CEO at Chartered House, said that Dubai and Abu Dhabi have seen prices fall because foreign workers left the country due to job losses after the pandemic. With the overall population contracting during the last six months, especially the Asians who make up the majority of the country’s population, this sent the demand downward. Also, the reason in decline in rating is mostly because consumer spending fell sharply in the fashion and luxury segments.
The second is the effects of virus containment measures, which have hit domestic demand hard and depressed price pressures. Sectors most vulnerable to containment measures have been those where inflation has fallen the most. For example, inflation of ‘recreational goods and services’ has plummeted in several Gulf economies as demand slumped.
Globally, Zurich, Paris, and Hong Kong are the three most expensive cities in 2020. The other cities in the top 10 ranking are Singapore, Tel Aviv, Osaka, Geneva, New York, Copenhagen and Los Angeles.