Industry sources believe the economic downturn and rising inflation have put mounting pressure on people’s earning as well as currency exchange rate worldwide, thus affecting consumers’ purchasing power.

“Currency fluctuations play a large role in the cost of living rankings. In the cases of Dubai and Abu Dhabi, a stronger US dollar meant an increase in rankings,” said Bassam Gazal, who heads the Mercer Survey practice across the Middle East region.

Dubai’s global ranking dramatically rose from 52^nd in 2008 to 20^th this year, with its cost of living (COL) index currently at 90.1 per cent from 89.3 per cent.

The UAE capital’s ranking also jumped 65^th a year ago to 26^th as the COL index steadily increased to 86.7 per cent from 85.7 per cent in 2008.

The study also suggested that the COL for expatriates across the GCC has climbed with Kuwait City, Kuwait skipping the 94^th rank to become 77^th; Manama, Bahrain left its 112^th spot to be 82^nd; Riyadh, Saudi Arabia moving from 119^th to 90^th. Jeddah, Saudi Arabia came out as the least expensive city in the Gulf, ranking 109^th in 2009 from 126^th last year. Other cities in the GCC failed to fall under the category of the study’s 143 rankings.

Mercer’s survey was based on the spending habits of expatriate communities in 143 cities across six continents, measuring the comparative cost of over 200 items in each location including housing, transport, food, clothing, household goods and entertainment.