Cost of Living adjusts in UAE amid rapid economic growth, Mercer 2023 report shows 

  • Mercer’s Cost of Living 2023 report sees Dubai and Abu Dhabi moving up to the 18th and 43rd spots globally
  • Data shows that despite inflationary pressures, UAE’s economic fundamentals bode well for growth and personal quality of life
  • Non-oil economic expansion and wage growth are identified as critical factors counteracting inflation and contributing to the UAE's economic resilience

Dubai, June 6, 2023: Mercer’s Cost of Living 2023 survey released today paints a comprehensive picture of global affordability, with Dubai and Abu Dhabi moving up in the rankings to the 18th and 43rd spots respectively. However, the UAE continues to showcase robust economic growth and resilience despite these changes, which provides a promising outlook for the future.

One of the key drivers behind the changes in 2023 rankings is the surge in rental costs. Notably, after Singapore (2nd) which has seen rent increases averaging 50% depending on the area, Dubai is the second city in the survey where the rental cost has had a significant impact on the ranking with rent increases averaging 25%. By contrast, the impact of housing movement has been notably lower in Abu Dhabi, where the change ranges between 6-8% and in some areas remains the same as last year. Outside of the rental increases, the survey has identified an increase in the cost of living in other categories in both Dubai and Abu Dhabi. For instance, the cost of food in supermarkets has risen by up to 11%, transportation by 4%, sports and leisure by 5%.

Commenting on the survey findings and UAE cost-of-living, Vladimir Vrzhovski, Financial Services and Technology Industries Lead at Mercer Middle East, said: “Employers in the UAE are taking note of these changes. Our research indicates that organizations have provided an average of 4.2% 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 long term commitment. Our research shows that as a response, 40% of the surveyed organizations have reviewed their 2023 policies by increasing their housing allowances on average by 5-10% based on the career level.”

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.

From a global standpoint, the report shows that Hong Kong (1st) retains its position as the most expensive city for expatriates, followed by Singapore, which climbed up from 8th to 2nd spot. Global hubs like London (17th), Amsterdam (28th) have dropped in the ranking by few spots, New York (6th) climbed up the ranking +1. In the Middle East region, Tel Aviv remains the costliest city for international employees, ranked 8th, Cairo 217th and Amman 110th.

Explaining the emerging challenges and opportunities, Vladimir added: “Despite the benefits of a growing economy, the survey shows that key factors that have shaped the world’s economy in 2022 will continue to exert an influence into 2023, with inflation and exchange-rate fluctuations directly impacting the pay and savings of internationally mobile employees. We can also see from the 2023 Global Risks Report from the World Economic Forum (WEF) and Marsh McLennan that the cost-of-living crisis is one of the most severe risks perceived by national governments and businesses around the world. The impetus for inflation mitigation is one that private businesses and the public sector must share.”

About Mercer’s Cost of Living Survey

Mercer's widely recognized Cost of Living ranking is one of the world’s most comprehensive studies and is designed to help multinational companies and governments determine compensation strategies for their international assignees. New York City is used as the base city for all city ranking comparisons and currency movements are measured against the US dollar. The survey includes 400+ cities throughout the world; this year’s ranking includes 227 cities across five continents and measures the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment. The data collected provides all of the key elements employers need to design efficient and transparent compensation packages for international assignees. Learn more here.


Ana Baptista

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