Singapore: Is it really the most expensive place to live?

The Economist Intelligence Unit (EIU) in its annual Worldwide Cost of Living (WCOL) survey ranks Singapore as one of the most expensive cities in the world. What some may not have realised is that the survey applies to expatriates, not Singaporeans.

The EIU’s Worldwide Cost of Living (WCOL) survey is designed to help human resource managers and finance managers around the world calculate cost of living allowances and build compensation packages for expatriates and business travellers. It does not reflect the cost of living for Singaporeans.

The EIU’s WCOL survey’s consumption basket does not reflect what Singaporeans usually consume.

The WCOL survey looks at the prices of a common set of products and services in the various cities to allow for city-to-city comparisons. As such, its consumption basket - which includes items such as international school fees and “three-course dinners at a top restaurant for four people” - does not reflect what Singaporeans regularly consume and is therefore not a good gauge of cost of living for Singaporean households.

A more representative indicator of cost of living in Singapore is the Consumer Price Index (CPI), which measures the average change in the prices of a basket of goods and services commonly purchased by Singaporean households. More information on the CPI can be found in the Singapore Department of Statistics’ website here ↗ (opens in new tab).

The rankings are sensitive to currency fluctuations.

The WCOL survey converts the prices of goods and services in the cities surveyed to US dollars to facilitate comparisons across cities. Singapore’s strong exchange rate thus contributes to its higher ranking compared to other cities with weaker exchange rates. However, a stronger currency does not raise the cost of living of Singaporeans who earn their income in Singapore dollars. On the contrary, a stronger Singapore dollar helps to dampen imported inflation in Singapore by lowering the prices of our imports (in Singapore dollars) and subsequently, consumer prices.

Are prices in Singapore going up?

Cost of living concerns are not unique to Singapore. Around the world, food and energy prices have gone up, which have in turn raised the prices of many goods and services. However, inflation in Singapore has peaked and is on a broad moderating path, easing to 2.0% in September 2024. Nonetheless, price levels remain high due to the earlier increases in inflation. The Government therefore continues to help households cope with cost of living concerns.

How is the Government helping Singaporeans to manage rising costs?

1. Managing domestic supply-side constraints. This includes managing the supply of industrial and commercial space, to help moderate business cost increases and reduce the knock-on impact on consumer prices.

2. Promoting competition in markets so that Singaporeans can enjoy competitive prices. This includes lowering barriers to entry for businesses, where possible. It also entails diversifying the sources of supply, including for food, to prevent sharp price increases in the event of disruptions.

3. Appreciating the Singapore dollar to dampen imported inflation. The Monetary Authority of Singapore (MAS) tightened monetary policy five times over 2021-22 and continues to keep the trade-weighted Singapore dollar exchange rate on a gradually appreciating path. A strong Singapore dollar reduces the costs of imported goods and services.

4. Providing targeted assistance, particularly for the lower- to middle-income households

Prime Minister and Finance Minister, Lawrence Wong enhanced the Assurance Package (AP) in Budget 2024 to help Singaporeans cope with cost-of-living concerns, with more support for lower- to middle-income households. The enhancements will also on average, fully cover the increase in spending by lower-income households and substantially cover the increase in spending by middle-income households, due to inflation in 2024.

Since the start of the year, eligible Singaporeans would have already received the following:

• CDC Vouchers in January and June totalling $800;

• 2024 AP MediSave and 2024 AP Seniors’ Bonus in February;

• Four tranches of U-Save and S&CC rebates in January, April, July and October;

• 2024 GST Voucher (GSTV) – Cash and GSTV – MediSave in August; and

• Cost-of-Living (COL) Special Payment in September.

Eligible Singaporeans will also receive the Assurance Package Cash, as well as the MediSave Bonus and Retirement Savings Bonus under the Majulah Package in December 2024.

The Government recognises Singaporeans’ cost of living concerns and will continue to monitor the situation closely and support Singaporeans through these challenging times.