Bahrain becomes more expensive

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Mercer’s Middle East 2016 Cost of Living Survey shows Bahrain has moved from the 91st rank to the 71st in just one year!

Many cities in the GCC region witnessed a jump in their rankings, pushed by other locations’ decline in the Mercer’s Middle East 2016 Cost of Living Survey. Expats are shelling out higher rental costs in the GCC cities particularly in Abu Dhabi and Jeddah. Manama, Bahrain is at 71 witnessing a jump of 20 places from its position last year; Riyadh is now the 57th most expensive city in the world, a big jump from its 71st place in 2015. Other cities also climbed in their rankings compared to last year; Doha is at 76th, up from 99th last year; Muscat is at 94th, up from 117th in 2015; Kuwait comes in at 103rd, also climbing from 117th position in 2015; and lastly Jeddah is at 121st, jumping from 151st last year.

According to the survey, Dubai and Abu Dhabi have topped the most expensive cities to live in the Middle East. While Dubai is the 21st most expensive city in the world, Abu Dhabi comes in at 25th, jumping from 33rd last year.

Rob Thissen, Talent Mobility Consultant at Mercer Middle East said, “These rankings uniquely combine day-to-day expenditure on goods and services such as food, clothing and transportation, with rental prices. While prices of most goods and services are considered to be cheaper in Saudi Arabia compared with Europe, it is the expatriate rental market that pushes cities like Riyadh and Jeddah up the ranking.”

“What this means is that once again, cities in our region have become more expensive to send people to, with expatriates expecting increased cost of living and housing allowances. To the contrary, when sending staff out of the Middle East, multinationals have to be wary that cost of living allowances are likely to go down, and have to clearly explain and communicate this to their staff to avoid lengthy discussions”, he adds.

We spoke to Hamad Al Mahmeed, Chief of Research and Strategic Planning, The Office of the First Deputy Prime Minister about Bahrain’s jump from 91st to 71st position in the list of most expensive cities in the world.

He said that since it is a ranking, it is important to compare things relatively as several countries, including Bahrain, experienced a jump in the rankings partly because they are pushed up by other countries’ declines.

He said, “If we compare to our GCC neighbours, all have faced the same upward trend. In fact, as an example, Dubai (21st) and Abu Dhabi (25th) have been ranked the most expensive cities to live in the Middle East and Riyadh is 14 spots ahead of Bahrain at 57th rank indicating a higher cost of living than Bahrain.”

According to Hamad, inflation in Bahrain has been relatively stable in the past, ranging between 2-3% in recent years. The ongoing reforms to redirect government subsidies (in light of declining oil prices) ought to have some effect.

He is hopeful that the long-term benefits towards sustainable development far outweigh the cost of higher prices. “Inflation is expected to stabilise at a rather healthy rate of 2% by 2017 – a rate that could have a positive impact on business and employment”, he adds.

Meanwhile, the Consumer Price Index released by Bahrain’s Information & eGovernment Authority in March 2016 shows “Housing, Water, Electricity, Gas and other Fuels”, “Alcoholic Beverages and Tobacco”, “Food and non-alcoholic beverages” and “Transportation” as the major groups causing a rise in Bahrain’s CPI, obviously due to subsidy cuts. The CPI or inflation between March 2015 and March 2016 is 3.3%, economists expect this figure to increase further.

Beginning this March, expats are not entitled to any subsidies for utilities. However, Bahrainis will continue paying at subsidized rates excluding the ones with more than one household and big companies and industries. The move is a part of a three-year campaign that plans to end subsidies by the year 2019.

Earlier, expats used to get accommodation and car allowances in addition to their monthly salary, but now such allowances have been done away with. Moreover, rising living costs will have an impact on the education sector as well. Expats sending their kids to an international school might have to revise their annual budget for school fees. In addition, there may be extra expenses such as school uniforms, text books, and extra-curricular activities.

Talking about electricity bills, if we take an average consumption for a flat to be 3,600 units for electricity and 62.5 units for water, the bill would usually cost BD32.4 for electricity and BD5 for water, before subsidy cuts. But without subsidies, there will be an increase in the utility bills of a small two-bedroom flat going up to BD104.4 and BD46.9 for electricity and water, totaling BD151.3 in 2019.

The electricity bill for a two-bedroom flat has increased to BD46.8 (3600units x 13fils) after the new tariffs were launched in March this year. It is estimated to climb BD64.8 (at 18 fils/unit) by next year, and in 2018 it will be BD82.8 (@ 23 fils /unit). In 2019, it will jump to BD104.4 (at 29 fils/unit). This means within few years the electricity tariff will triple.

The average tariff for water for a two room flat was BD5 (@80 fils/unit) with the average consumption of 62.5 units. It has increased to BD12.5 (200 fils/unit) from March and is expected to rise to BD18.8 (300fils/unit) in 2017. Furthermore, it is predicted to increase to BD31.3 (@500 fils/unit) in 2018.

Gulf Insider spoke to Sameera Pathan, an expat from India, to know the predicament of a common man. Sameera lives in a two-bedroom flat with her husband and two kids. She said that the rent has increased and food has become costlier too. Earlier they used to go out a couple of times in a month, but now they get take away only once a month. Their grocery bill has almost doubled leaving them with no option but to get only the basic stuff.

When asked about the rise in electricity tariff, she said that their electricity bill has increased by 5 BD. “In order to control our electricity bills, we make it a point to sit in one room. Also, I have given clear instructions to my kids to switch off the lights before leaving the room and turn off TV and laptop when not in use”, she said. She is hopeful that these small steps will make a difference in controlling their electricity bill.

On being asked if they will consider going back to India, she said that though inflation has made things a little difficult, they are managing and are trying to stick to the budget. Going back is definitely not on the cards, she adds.

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