Middle East cities pricier for expats, finds cost of living index

International employees in the Middle East are finding life is more expensive, as inflation continues to affect regions around the world. That is according to cost of living index from global consulting firm Mercer.

All of the Middle Eastern cities featured in the Mercer index have risen vis a vis their position last year, meaning they are more expensive for expats to live and work in. According to the index, those higher prices are mostly due to an increase in the cost of living, with groceries seeing price increases of around 7%, personal care items up 5%, and eating out at restaurants up by 4%.

In the case of Saudi Arabia, there are several contributing factors to increasing costs, mostly to do with the bright economic outlook for the country. Those include rising wages, one of the highest GDP growth rates in the world and the rapid growth of industries outside of the energy sector, a general trend among Middle Eastern countries that are basically all rushing to diversify their economies away from oil.

“In 2022, Saudi Arabia recorded an 8.7% growth in GDP and remains one of the world’s fastest-growing economies, keeping the country on-track to achieving the objectives laid out in Saudi Vision 2030,” said Najla Najm, partner and career leader at Mercer.

“Sweeping pro-business reforms and a sharp rise in oil prices and production have facilitated strong economic recovery, with the oil sector as one of the main drivers of the country’s economic expansion, contributing at least 4.8% of the Kingdom’s overall growth in 2022. Employers are recognizing these changes. Our research shows that Saudi Arabia has witnessed a strong growth in salary increments on the back of its robust economic development.”

This increase in cost of living is especially significant for GCC countries, which have exceptionally large numbers of foreign nationals working in their industries. Of the nearly 37 million people inhabiting Saudi Arabia, around 40% are foreign-born nationals. In the UAE, the percentage of expats is a remarkable 89% of its population of approximately 10 million.

A study by PROCAPITA released earlier this year found that more than 8 out of 10 organizations in the GCC last year increased their compensation and benefits to their employees.

Among cities in the Middle East, Mercer found Tel Aviv is the costliest holding 8th place in its global ranking. Dubai is the next costliest, ranking at 18. Saudi cities Riyadh (85) and Jeddah (101) are lower on the ranking, but have both jumped up more than ten places in the ranking since last year.

According to a previous report, the prices of luxury homes in Dubai rose by 48% since last year. That represents a dramatic increase of 225% since the pandemic low in the third quarter of 2020.