In this article, we will be taking a look at the 35 most expensive countries in the world. To skip our detailed analysis, you can go directly to see the 10 most expensive countries in the world.
While learning about the most expensive countries in the world would be relevant any time, it is particularly important now that most countries in the world have been dealing with record inflation. In fact, according to Ipsos, for the eight month in a row, inflation was the biggest worry with over 42% respondents choosing it as a worry. While some countries have faced inflation in the high single digits, the scenario has been far worse for many countries, especially those with fewer resources such as Pakistan where the inflation rate was close to 25% in December 2022. Another country grappling with inflation is Poland, where the inflation rate was 16.6% in December 2022 and was the single biggest cause for concern among respondents from the country, with 65% still worried about inflation.
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When inflation rises, the disposable income of consumers decreases as the cost of buying essentials rises. This leads to lower spending which affects the operations and sales of corporations which in turn has a negative impact on the country’s economy. To combat inflation, the central banks of a country start to hike interest rates which in turn, increases the cost of borrowing and has a detrimental impact on investing. This is why 2022 has been one of the worst years for stocks in recent memory. In fact, the first half of 2022 resulted in U.S. markets facing their worst first half in over half a century, all thanks to the grip of inflation. While most stocks have suffered, tech stocks have been hit particularly hard with the tech-heavy Nasdaq posting a full year loss of 32.4%, while the S&P 500 lost 18.1% in the same period. FAANG companies have been particularly hard hit with Meta Platforms, Inc. (NASDAQ:META) losing around 57% in share price in the last year, Amazon.com, Inc. (NASDAQ:AMZN) losing 38% in the same period and Netflix, Inc. (NASDAQ:NFLX) losing 38% in the same time period.
While you could hope that 2023 will fare better, it seems that a recession is imminent, which does not bode well for businesses and investors, and could have an even worse impact on people, especially those living in the most expensive countries in the world. As economic activity is slowing down, many companies are reducing their number of employees in an effort to decrease costs, which is why companies such as Amazon.com, Inc. (NASDAQ:AMZN) and Meta Platforms, Inc. (NASDAQ:META) have fired thousands of employees across the globe. In a world where the cost of living has risen to such high levels, unemployment is even more debilitating than normal. According to IMF’s World Economic Outlook in October 2022, global activity has been decreasing at a sharp rate, which as mentioned is driven by inflation and has engulfed the world in a cost of living crisis. Other events such as Russia’s invasion of Ukraine and the still felt effects of the Covid-19 pandemic have also had a detrimental impact on the global economy. Even though global inflation is expected to decline from a 2022 high of 8.8 globally, the expected inflation rate of 6.5% in 2023 and 4.1% in 2024 will be difficult to manage as well. If monetary and fiscal policies are implemented properly by respective governments, the cost of living crisis might be brought under control or at least alleviated to an extent.
This doesn’t mean that the world is doomed for long though. After the financial crisis in 2007 – 2008, which led to a major global recession, the world recovered strongly. In fact, according to data from the World Bank, the global GDP has increased by 53.4% in just the last decade, from a global GDP by PPP of $95.6 trillion in 2011 to $146.7 trillion in 2021, despite the negative impact of the pandemic in the last couple of years. With continuous advancements being made, while the cost of living may be increasing, the standard of living has never been higher and continues to grow at a rapid pace, even if high standards of living aren’t uniform across the board.
It is not an easy task to determine accurately the most expensive countries in the world, as there are many ways to go about it, with some methods being far more accurate than others. Before we move on to discuss our methodology, let’s first discuss GDP by PPP and real GDP. Real GDP refers to the actual GDP of a country, or the measure of its value of goods and services, with the figure being adjusted for inflation. GDP by PPP (purchasing power parity) on the other hand, eliminates the impact of currency exchange rates on the GDP of a country, instead using price relatives, or the ratio of prices in their local currencies, to calculate the GDP. Since this eliminates the impact of exchange rates, it provides a much more accurate figure, especially for comparison between countries. One such example is that based on real GDP per capita, Japan, Switzerland and Norway are well above the U.S. because of higher prices in the countries, but adjusted for GDP by PPP, the U.S. has a higher GDP per capita then these countries.
Methodology
To find out the most expensive countries in the world, we have used the real GDP in $US vs GDP by PPP for each country, with data being gathered from the World Bank. We then calculated the ratio of real GDP to GDP by PPP for each country, as the higher the ratio, the more expensive the country is in terms of its prices. We rounded off the ratio to two figures which is why some countries may seem to have the same ratio but the actual rankings have been determined without rounding. So, let’s now take a look at the most expenses countries to live in, starting with:
35. Curacao
Real GDP / GDP by PP ratio: 0.77
Kicking off our list is Curacao, a Dutch Caribbean Island which is a high income economy.
34. Italy
Real GDP / GDP by PP ratio: 0.78
Even though there are several European countries more expensive than Italy, it is still one of the most expensive countries in the world.
34. Palau
Real GDP / GDP by PP ratio: 0.8
Even though its located in South Asia, Palau’s currency is the US dollar which automatically makes items much more expensive especially when compared to other southeast Asian countries.
33. Nauru
Real GDP / GDP by PP ratio: 0.81
Nauru holds the unique distinction of being the least visited country in the world, as it can only be reached by air from a few specific destinations.
32. Bahamas
Real GDP / GDP by PP ratio: 0.83
While there is no income tax in Bahamas, most goods are imported which in turn increases the cost of living in the nation.
31. France
Real GDP / GDP by PP ratio: 0.86
High VAT is one of the reasons why France is so expensive though smaller towns are cheaper than Paris, which is the most expensive city in the country by far.
30. Belgium
Real GDP / GDP by PP ratio: 0.87
High labor costs are one of the reasons behind Belgium being an expensive country.
29. Solomon Islands
Real GDP / GDP by PP ratio: 0.87
The high cost of living has been an issue for Solomon Islands for years now and shows no signs of abating.
28. Germany
Real GDP / GDP by PP ratio: 0.88
While Germany is not as expensive as other Western European countries, it is still considered to be quite expensive globally.
27. Netherlands
Real GDP / GDP by PP ratio: 0.91
A high demand and low supply of quality rental properties has resulted in rents increasing significantly which in turn has negatively impacted the high cost of living in the country.
26. Puerto Rico
Real GDP / GDP by PP ratio: 0.91
Puerto Rico has the highest corporate, sales and individual taxes in the U.S. which combined with lower salaries, make it an expensive place to live in.
25. Japan
Real GDP / GDP by PP ratio: 0.92
Japan is home to some of the most densely populated cities in the world which comes with high costs.
24. Austria
Real GDP / GDP by PP ratio: 0.92
While the standard of living in Austria is among the best in the world, the cost of living is among the highest globally even when compared to other European countries.
23. United Kingdom
Real GDP / GDP by PP ratio: 0.94
While some towns in the United Kingdom aren’t as expensive to live in, London is one of the most expensive cities in the world to live in, even though salaries aren’t relatively as high.
22. Ireland
Real GDP / GDP by PP ratio: 0.94
A common theme among the most expensive countries in the world is a lack of competition in many industries, which results in higher prices for consumers.
21. Marshall Islands
Real GDP / GDP by PP ratio: 0.94
Marshall Islands may not be long in this list, or even be counted as a country, as the projected sea level rise indicates that more than 40% of buildings in Majuro, Marshall Island’s capital, would be permanently flooded while whole islands could disappear.
20. Finland
Real GDP / GDP by PP ratio: 0.98
A low level of competition in some closed-sector industries is cited as one of the reasons why Finland is so expensive.
19. Vanuatu
Real GDP / GDP by PP ratio: 0.98
Because rent is so high, Vanuatu’s cost of living is continuing to rise as well.
18. Micronesia
Real GDP / GDP by PP ratio: 0.98
Micronesia is spread across the Pacific Ocean with over 600 islands and is one of the most expensive countries in the world.
17. Luxembourg
Real GDP / GDP by PP ratio: 0.99
Luxembourg has one of the highest GDPs per capita and is continuing to seeing a higher cost of living because of an increasing population, lack of new housing and rising housing prices.
16. Canada
Real GDP / GDP by PP ratio: 1.00
Canada is continuing to get more expensive by the year and especially because of the high cost of housing, with prices rising 11.8% compared to the previous year.
15. United States
Real GDP / GDP by PP ratio: 1.01
The United States is a vast country where many places have a low cost of living while other states such as California have a very high cost of living.
13. Turks and Caicos Islands
Real GDP / GDP by PP ratio: 1.03
Several of the Pacific Islands are among the most expensive countries in the world because they import most of their goods, including Turks and Caicos Islands, where there is a 30% import tariff on all such imports.
12. Sweden
Real GDP / GDP by PP ratio: 1.03
Sweden isn’t as expensive to live in as other Scandinavian countries but strict labor laws result in companies finding it more expensive to employ people.
11. Tuvalu
Real GDP / GDP by PP ratio: 1.04
One of the reasons why Tuvalu is so expensive is because its fuel has to be imported which is a major part of living expenses.
Click to continue reading and see the 10 most expensive countries in the world.
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Disclosure: None. 35 most expensive countries in the world is originally published at Insider Monkey.
