Paris and Zurich become the most expensive cities in the world to live due to COVID-19

Paris and Zurich have joined Hong Kong to become the most expensive cities in the world due to the impact on prices of everyday goods from the COVID-19 pandemic.

The French capital and the Swiss city overtook Singapore and Osaka to take – along with Hong Kong – the first place in the latest Cost of Living Index of Economist Intelligence Unit (EIU), dependent on the influential magazine The Economist.

The index compared the prices of 138 goods and services in some 130 cities in September 2020 and found that prices had risen on average by 0.3% in the past year.

However, the regions were affected differently.

In general, cities in the Americas, Africa, and Eastern Europe have become less expensive, while those in Western Europe have become more expensive. This is partly explained by the rise in European currencies against the US dollar.

Geneva (7) and Copenhagen (9) are the other two European cities in the top 10, completed by Singapore, Tel Aviv, Osaka, New York and Los Angeles.

Singapore and Japan’s Osaka, which last year ranked first with Hong Kong, have become cheaper because the pandemic has caused an exodus of foreign workers, creating a drop in demand and, therefore, prices. Also in Japan, the government has subsidized costs such as public transportation.

How the pandemic affected the consumption of city dwellers

The index concludes that prices were affected by five main trends: currency fluctuations, supply chain problems such as shortages of certain goods, including pulp and toilet paper, measures taken by governments such as price controls, the more cautious approach of consumers for fear that their income will suffer, and changes in lifestyle.

The report notes that restrictions and lockdowns have changed what consumers now consider essential and that price-conscious consumers have switched to cheaper alternatives, increasing competition for less expensive goods.

However, the prices of premium products have hardly been affected because people with high incomes have not changed their habits much, although they tend to buy less often.

Alcohol, Tobacco, and Recreational Products, Highest Up

Prices of consumer staples have generally remained stable, but prices for alcohol and tobacco have risen, with the latter registering the largest year-on-year increase of all nondurable goods.

Apart from tobacco, the prices of recreational items and services – books, consumer electronics – have seen the largest average increase.

Clothing was the only category in which there was an average drop in the index, due to low demand, because most non-essential stores were closed for several weeks during lockdowns.

Tehran, Perth and Guangzhou rose the most in the index compared to last year, but they still rank 79th and 62nd overall, respectively.

In the case of the Iranian capital, which rose 27 places from one year to the next, prices were affected by the sanctions of the United States that have affected the supply of goods.

The Icelandic capital Reykjavik, Sao Paulo and Rio de Janeiro were the cities that fell the most in the ranking. Latin America has been severely affected by the weak currency and rising levels of poverty.

The cities with the lowest cost of living are Damascus in Syria, Tashkent in Uzbekistan, Lusaka in Zambia and the capital of Venezuela, Caracas.

The Economist Intelligence Unit expects price trends to remain similar in 2021, as the global economy is unlikely to return to pre-pandemic levels until 2022.