Economists have debated the findings of a bi-annual survey conducted by the Economist Intelligence Unit (EIU), which named Singapore as the world’s most expensive city, media reports said.
They warn against extrapolating that the cost of living for Singaporeans has also skyrocketed since such deductions are limited by two major factors – currency fluctuations and the expatriate focus of the survey.
In the Worldwide Cost of Living survey, EIU converts the prices in each country into US dollars in order to achieve comparative indices. As a result, Tokyo’s weaker yen pushed the city down to sixth spot, while the continued strength of the Singapore dollar propelled the city-state to the top position.
“There’s so much (buzz) about Singapore taking the top spot, but a lot of this has been fuelled by the fluctuations in different currencies. I wouldn’t read too much into it, because next year we could be number six again,” said Francis Tan, economist at UOB.
Vishnu Varathan, economist at Mizuho Bank, added: “If one were to look at cost of living from the point of view of a domestic person, then currency movements arguably don’t matter as much.”
He added that the survey has inherent biases since “they’re looking to compare (like-for-like) items, they probably missed out on some local stuff, and that’s going to work against us. For example, if we take the price of a cappuccino, it will likely set you back about S$5. But that’s not the same as getting Ah Poh’s coffee at Golden Shoe.”
Meanwhile, CIMB economist Song Seng Wun underscored the expatriate focus of the survey and its purpose as a tool to determine the salaries of foreigners.
Despite these limitations, all three economists are in agreement that the survey results are worth reflecting upon.
The findings may suggest that Singapore is losing its cost competitiveness, but UOB’s Tan disagrees: “There’s a reason why Singapore is expensive, and there’s a price to pay for everything. If (multinational corporations) want to be in a country where you push a button and things work, where there is near-zero political risk, where the business environment is vibrant – they’ve got to pay a premium for that.”
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories email romesh@propertyguru.com.sg
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