Tel Aviv has been named the most expensive city in the world for the first time. The Israeli city climbed up from the 5th spot last year according to the ‘Worldwide Cost of Living’ report by the Economist Intelligence Unit (EIU). It surpassed the living cost of Paris, New York, Singapore, Hong Kong, and Zurich as inflation keeps rising across the world.
The survey’s index is compiled by comparing prices of 50,000 goods and services in 173 cities in US dollars as prices for freight and commodities increased. Tel Aviv ranked number 1 due to the increasing strength of its national currency against the dollar. According to reports, the shekel has grown 4% within 1 year, making it the most performing Emerging Market currency since the COVID-19 pandemic started to hit the world economy.
The rapid rise in inflation in the wake of the pandemic has pushed up the cost of goods and services to alarming levels.
The Most Expensive City for Living
As the global economy tried to recover from the impact of the lockdowns, it largely dislocated and shook up the list of rankings. The report has highlighted the soaring rate of the shekel and rising local prices as the main reason why Tel Aviv has become the most expensive city in 2021. The report said that the prices for goods and services rose by 3.5% this year compared to 1.9% last year. This rate of inflation was the fastest ever recorded in the previous 5 years.
Tel Aviv saw a significant rise in transport, groceries, tobacco, and personal care prices. Costs are exceptionally high for transportation because rising oil prices boosted the rate of unleaded petrol by 21%. Tel Aviv is also the 2nd most expensive city for buying alcohol and transport, 5th for personal care and 6th for recreation. It made the top third in all 10 of the EIU’s major spending categories, with its index score up by 5 points since last year.
The report does not include property prices, but it mentioned that it rose dramatically in residential areas.
Supply Chain Disturbance Across the World
Tel Aviv has not been affected by the supply chain bottlenecks, labour shortages, and trade restrictions like some other countries. The prices of energy and food have skyrocketed in the US, UK, France, Australia, China, and many others.
The report added 40 new cities this year in the rankings of the World’s Most Expensive City. Scotland’s capital Edinburgh was the highest new entry, sharing the 27th spot with New Zealand’s Auckland and US’s Minneapolis. German city Stuttgart and American San Diego also entered the list for the first time and made it straight into the top 50.
EIU said that the rankings could continue to shift periodically due to the changes caused by the coronavirus pandemic.
Which is the Cheapest City?
The Middle Eastern and African cities are mainly the cheapest ones, but Tehran has increased in the rankings, jumping from 79th place last year to 29th in 2021. The report revealed that US economic sanctions in Iran, which Donald Trump reinstated in 2018, continue to cause goods shortages and inflate import prices. Rome, on the other hand, saw the highest fall in the ranking. It went down to 32nd from 48th place after enjoying a sharp decline in clothing and grocery prices. Damascus, the capital of war-torn Syria, is named the cheapest city for living. Interestingly, the most expensive city in the world and the cheapest are just 130kms apart.
4 years ago, Tel Aviv was not even in the top 5 most expensive cities globally. EIU estimated that the cost of living worldwide would rise further as wages increase in many industries. However, it expects the central banks to raise interest rates soon, after which the soaring prices can start moderating.