Almaty cost of living lowest among major cities

Almaty cost of living lowest among major cities
By bne IntelliNews March 21, 2017

Kazakhstan’s largest city and business centre Almaty has dropped to last place on the Economist Intelligence Unit’s bi-annual ranking of the cost of living in major cities around the world. 

Deflation and devaluations were a prominent factor in determining the cost of living in 2016, according to the report. Almaty fell six places on the index the year after Kazakhstan’s central bank governor Daniyar Akishev re-introduced a free-floating exchange regime, and announced it would minimise its involvement in the foreign currency market. 

The index ranks cities according to over 400 individual prices across 160 products and services including food and drink, property rents, private schools and entertainment. Cities are compared to New York, whose index is set at 100. 

Almaty is now ranked the cheapest among the 133 cities included in the ranking, one place above the Nigerian capital Lagos. Prices of bread, wine and petrol all fell in Almaty in 2016 compared to the average over the last five years. 

“Almaty’s citizens may not feel that the city is getting cheaper; despite measures to control prices, Almaty has seen inflation approaching 20% during 2016,” the EIU report says. However, it adds that local price rises have not completely offset a 50% devaluation in the tenge since it was allowed to float in August 2015.

It has been a similar picture among the Chinese cities on the list, which fell by between five and 16 places, driven by “weakening consumption growth and a steady devaluation of the renminbi”. 

The report also cites the impact of political or economic disruption at the bottom of the ranking, which is dominated by cities from the Indian subcontinent, alongside three East European cities - Almaty, Bucharest and Kyiv. 

“[T]here is a considerable element of risk in some of the world’s cheapest cities. Karachi, Algiers, Kyiv and Lagos have faced well-documented economic, political, security and infrastructural challenges … Put simply, cheaper cities tend also to be less liveable,” according to the EIU. 

Fluctuations in oil and commodity prices are one of the main factors influencing the index, especially in resource rich countries such as Kazakhstan, which has seen its GDP growth slump to just 1% in 2016, though Economy Minister Timur Suleimenov recently predicted growth could rebound to 2.8% this year if oil prices rally. 

In addition to the bottoming out of oil prices in 2016, the report notes a rapid rise of inflation has risen rapidly in developing economies, especially those that experienced currency declines in 2015 which have since been reversed. “This is especially true in commodity-reliant countries, given that oil and commodity prices are on the rise again, albeit at much lower levels than in 2013-2014,” the report says. 

The Brazilian cities of São Paulo and Rio de Janeiro are the fastest–rising cities in the cost of living ranking, moving up 29 and 27 places respectively. Moscow is also one of the top movers in the last 12 months, advancing by a more modest 15 places to 98th. 

No cities from Eastern Europe were in the 10 most expensive cities, which were topped by Singapore and included four other cities from East Asia, four from Western Europe plus New York. 

Looking ahead, the EIU forecasts oil prices - set to rise this year - will continue to have a strong influence on the cost of living in many countries. Political factors are also expected to be important, especially in Europe as the UK prepares to trigger article 50 on its exit from the EU, and critical elections approach in other EU member states. Greek debt is also on the rise again. 

Meanwhile, the report forecasts that under Donald Trump’s presidency in the US, a “significant upheaval in trade agreements and international relations”, which could “push up prices for imports and exports around the world as treaties unravel or come under scrutiny”. 

 

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