Some may be disappointed by this result. Both New York and Singapore have been named the most expensive cities in the world to live in.
This is not the first time the Republic has led the EIU’s Global Cost of Living ranking; in fact, it is the seventh time in the last decade.
The twice-yearly EIU study evaluated costs for over 200 goods and services across 172 locations. Items such as groceries, clothes, home goods, and transportation all had their costs listed.
In 2016, Tel Aviv, Israel, came out on top, followed by Singapore and the French capital, Paris.
This poll suggests that the cost of living in Singapore has been continuously high. We look at four of the main factors that have contributed to Singapore’s reputation as the world’s most costly metropolis.
High Inflation
Increasing prices in major cities throughout the globe, including Singapore, have been attributed in large part by the EIU to rising inflation.
The poll found that among the world’s major metropolises, the average price of products in local currency terms rose by 8.1% this year. In 2021, prices increased by 3.5 percent.
Over at least the last 20 years, this is the highest rate ever recorded. According to EIU, food and utility costs have risen even more dramatically than gasoline prices have.
According to the latest report on consumer prices from the Monetary Authority of Singapore and the Ministry of Trade and Industry, Singapore’s overall or headline inflation is predicted to average approximately 6% for this year. The rising cost of living may be partly attributed to higher food and lodging prices.
Rise in Value of Singapore Dollars
A city’s position on the list of the world’s most expensive is determined by more than just its inflation rate.
If the cost of living in a place is greater when stated in a globally used currency, then that city will likely increase in the rankings if its currency is strong. For determining an index for a given city, EIU first translates local prices into US dollars. Dollar-to-currency exchange rates also have a role in determining the order of countries.
This means that Singapore’s excellent EIU rating is mostly attributable to the country’s robust currency.
As a result of Federal Reserve interest rate rises this year, the dollar has strengthened versus numerous other currencies. With its large foreign currency reserves and robust current account surplus, Singapore’s dollar has proven to be surprisingly resistant to the rises.
Disruptions of Trade from Ukraine War
The conflict in Ukraine has contributed to a rise in food and household products prices due to a tightening of trade restrictions. The Energy Information Administration (EIA) found that gasoline prices rose the quickest.
A combination of rising global oil prices and a stronger US dollar has led to a 22% annual increase in the average price of a liter of gasoline in local currency terms.
On the contrary, Singapore’s open economy is vulnerable to international trade tensions. For example, fuel prices topped $4.00 per gallon in June owing to speculation of an embargo on Russian oil and increasing post-pandemic demand from economies.
Utility costs for electricity and gas increased by an average of 11% in local currency terms across the 172 cities surveyed due to the high prices of energy commodities.
Cost of Luxurious Non-Necessities Items
Due to stringent government limitations on the number of automobiles, EIU claims that Singapore has the highest transport costs in the world. Clothing, alcohol, and cigarettes are all among the most costly in the city.
These are the kind of things that a Singaporean who aspires to a modicum of luxury must invest on.
In fact, a DBS report indicated that Singaporeans’ expenditure on non-essentials had grown in the preceding twelve months. They spent more money than they had planned on eating out, going to the movies, and going on vacation.
The so-called “cost of living crisis” will end in 2023.
When Singapore was rated as the second most expensive city in the world by the EIU index last year, the country’s commerce ministry said at the time that the ranking may not accurately represent the true cost of living for Singaporean families.
The EIU’s consumer basket is not representative of average Singaporean families, the report said. Foreign newspapers from across the world, which are not widely read in Singapore, are included in the index. The administration stressed that it has been aiding residents by taking initiatives to reduce the cost of living.
Slowing economies and easing supply bottlenecks mean that prices in Singapore will begin to fall next year. When freight prices decrease and demand decreases, the backlog created by supply chain disruption should begin to diminish as well.
According to EIU’s projections, global consumer price inflation would decrease from its estimated 9.4 percent this year to 6.5 percent in 2023.
Unless the conflict in Ukraine intensifies, the EIU forecasts that the costs of energy, food, and supplies like metals will drop significantly in 2023 compared to 2022 levels, although remaining higher than historical averages.