It has been brought forward by the latest ‘Cost of Living’ Survey by global HR consulting firm Mercer that the most expensive cities in the Gulf region for expatriates to live in are Dubai and Abu Dhabi.

It is being firmly held by industry sources that lot of pressure on people’s earning has been put by the economic downturn and rising inflation, which has also affected  currency exchange rate worldwide. It ultimately affected the consumers’ purchasing power.

Bassam Gazal, who heads the Mercer Survey practice across the Middle East region said: “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.”

This year saw an enormous rise in Dubai’s global ranking from 52nd in 2008 to 20, with its cost of living (COL) index currently at 90.1 per cent from 89.3 per cent.

Furthermore, a jump was also seen in the UAE capital’s ranking 65th a year ago to 26, since the COL index steadily increased to 86.7 per cent from 85.7 per cent in 2008.

“The COL for expatriates across the GCC has climbed with Kuwait City, Kuwait skipping the 94th rank to become 77th; Manama, Bahrain left its 112th spot to be 82nd; Riyadh, Saudi Arabia moving from 119th to 90th,” suggested the study.

The least expensive city in the Gulf was Jeddah, Saudi Arabia, which were ranked 109th in 2009 from 126th last year. Rest of the cities in the GCC could not fall under the category of the study’s 143 rankings.

The survey by Mercer 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.