The cost of living has been the hottest topic globally for more than a year now. As 2023 starts to settle in, multiple macroeconomic shocks to the global economy are now starting to recede, but have dealt their impact to most people in wealthy and developing countries alike.
The pandemic necessitated global lockdowns that ferried populations indoors and shut down factories, hotels, and other business facilities. This naturally ended up reducing economic output, and to navigate some of the aftershocks, central banks reduced interest rates and started stimulus spending. This injected cash into the economies and staved off some shocks, but right as the inflationary effects (more cash = more spending = price hikes) were starting to be felt, the Russian invasion of Ukraine began. This upended the global commodities and energy markets and the result was historic inflation that shocked governments and the everyday consumer in nearly every country.
On the inflationary front, estimates from the International Monetary Fund (IMF) have some promising news. The Fund's latest World Economic Outlook issued in April 2023 shows that inflation will fall this year. The IMF believes that while global inflation stood at 8.7% last year, it will come down to 7% by the end of this year. This drop will be fueled by a reduction in commodities prices, but the impact of high energy and other costs on 'core' inflation - i.e. all prices except the volatile food and energy costs, will remain stickier. It is also important to note that the Fund's 7% estimate for 2023 is higher than the estimate for this year that it had provided in January. The previous estimate had expected inflation to sit at 6.6%, and the latest figures show that high prices will remain a pressing problem in the near future.
Inflation is not only a pressing concern for consumers but also for economists. A Reuters survey of 268 economists, the results of which were published in late April 2023, showed that more than three quarters of those polled worried that the inflation for this year could end up being higher than their estimates. Additionally, most of the economists polled believe that inflation is the biggest threat to the global economy this year, with risks to the financial system due to higher interest rates coming in second place.
In its attempt to reign in inflation, the U.S. Federal Reserve has been on an interest rate hiking spree since last year, which has had the added effect of contributing to inflation in other countries. As the Fed increases interest rates and other central banks fail to match its pace, funds flow into the U.S. to take advantage of the higher returns. This leads to the U.S. dollar gaining strength, and since global oil is priced in dollars, this contributed to rising gas prices in other countries and accusations of the U.S. 'exporting its inflation' to the world.
Speaking of which, the Federal Reserve's Monetary Policy Committee held its latest meeting in May 2023, where it decided to raise interest rates by another 25 basis points (0.25%). The Chairman of the Federal Reserve, Jerome Powell, addressed reporters after the meeting, and while he did not explicitly state that his organization had decided to pause hiking rates, he nevertheless did outline that from now on, the Fed will look at real time data from the U.S. economy to decide whether more interest rate hikes are warranted.
33 Cities With Lowest Cost of Living in 2023
Providing a brief overview of the inflationary situation in the U.S., Mr. Powell stated:
Inflation remains well above our longer-run goal of 2 percent. Over the 12 months ending in March, total PCE prices rose 4.2 percent; excluding the volatile food and energy categories, core PCE prices rose 4.6 percent. Inflation has moderated somewhat since the middle of last year. Nonetheless, inflation pressures continue to run high and the process of getting inflation back down to 2 percent has a long way to go. Despite elevated inflation, longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets.
With these details in mind, let's take a look at the cities with the lowest cost of living in the world in 2023.
Our Methodology
To compile our list of the cities with the lowest cost of living, we first used the cost of living indexes from Numbeo and Expatistan. Then, we chose the 100 cheapest cities to live in based on the Expatistan index and the 200 cheapest cities to live based on the Numbeo index. To create our own cost of living index, we took the cost of living scores from both of these datasets and averaged them out. There were a total of 42 cities common to both, and out of these, the top 33 are listed as part of our list of the cities with the lowest cost of living.
Cities With Lowest Cost of Living in 2023
33. Bucharest, Romania
Insider Monkey's Cost of Living Score: 57.6
Bucharest is the capital of, and the largest city in, Romania. It is a hub for the Romanian economy and accounts for a large portion of the country's GDP.
32. Guadalajara, Mexico
Insider Monkey's Cost of Living Score: 57.2
Guadalajara is one of the most populous cities in Mexico, with more than a million people living in its boundaries.
31. Rio de Janeiro, Brazil
Insider Monkey's Cost of Living Score: 57.1
Rio de Janeiro is the second largest city in Brazil in terms of population. It also has one of the largest economies in the country.
30. Florianópolis, Brazil
Insider Monkey's Cost of Living Score: 56.15
Florianópolis is one of the most developed cities in Brazil in terms of human development.
29. Quito, Ecuador
Insider Monkey's Cost of Living Score: 56
Quito is the capital city of Ecuador, which also makes it a political hub in the country. It is also home to the country's largest oil company, Petroecuador.
28. Istanbul, Turkey
Insider Monkey's Cost of Living Score: 53.8
Istanbul is one of the largest cities in the world and a global metropolis with a population of more than ten million people.
27. Santiago de Querétaro, Mexico
Insider Monkey's Cost of Living Score: 55.3
Santiago de Querétaro is a growing economic hub in Mexico that houses a large number of multinational companies.
26. São José dos Campos, Brazil
Insider Monkey's Cost of Living Score: 55.25
São José dos Campos is one of the largest cities in Brazil in terms of population. It is a hub for aerospace research in the country.
25. Curitiba, Brazil
Insider Monkey's Cost of Living Score: 55.15
Curitiba is one of the largest cities in Brazil in terms of population, with close to two million people living in it.
24. Cape Town, South Africa
Insider Monkey's Cost of Living Score: 54.6
Cape Town is the capital city of South Africa and the second largest city in the country. It is an economic hub in the country, fueled by the information technology industry.
23. Porto Alegre, Brazil
Insider Monkey's Cost of Living Score: 54.55
Porto Alegre is one of Brazil's largest cities counting more than a million people as its population.
22. Johannesburg, South Africa
Insider Monkey's Cost of Living Score: 54.25
Johannesburg is a South African megacity that is also responsible for a large portion of the country's economic output.
21. Santiago de Guayaquil
Insider Monkey's Cost of Living Score: 54.1
Santiago de Guayaquil is an Ecuadorian port city responsible for handling most of the country's international trade.
20. Suva, Fiji
Insider Monkey's Cost of Living Score: 54.1
Suva is the capital of Fiji and an important port city in the country.
19. Pretoria, South Africa
Insider Monkey's Cost of Living Score: 53.35
Pretoria is the capital of South Africa and houses the highest number of universities in the country.
18. Manila, Philippines
Insider Monkey's Cost of Living Score: 52.45
Manila is the capital of the Philippines and one of the most densely populated regions in the world.
17. Lima, Peru
Insider Monkey's Cost of Living Score: 52.4
Lima is a financial and economic hub in Latin America and the capital of Peru.
16. Chengdu, China
Insider Monkey's Cost of Living Score: 51.45
Chengdu houses more than twenty million people and is a logistics hub in its area.
15. Federal Territory of Kuala Lumpur
Insider Monkey's Cost of Living Score: 50.85
Kuala Lumpur is the largest city in Malaysia in terms of area and one of the fastest growing in Asia.
14. Jakarta, Indonesia
Insider Monkey's Cost of Living Score: 50.55
Jakarta is the capital and the largest city in Indonesia. It is also an economic hub in the country.
13. Ho Chi Minh City, Vietnam
Insider Monkey's Cost of Living Score: 49.1
Ho Chi Minh City is one of the largest cities in the world with a population of almost ten million people.
12. Nairobi, Kenya
Insider Monkey's Cost of Living Score: 47.8
Nairobi is the capital of Kenya and a financial hub in the country.
11. Plovdiv, Bulgaria
Insider Monkey's Cost of Living Score: 47.2
Plovdiv is a Bulgarian city which is one of the smaller ones on our list with a population of just over three hundred thousand people.
10. La Paz, Bolivia
Insider Monkey's Cost of Living Score: 47.05
La Paz is a hub for the manufacturing industry in Bolivia and the seat of government in its country.
9. Iași, Romania
Insider Monkey's Cost of Living Score: 45.30
Iași is a cultural and historical hub in Romania.
8. Burgas, Bulgaria
Insider Monkey's Cost of Living Score: 45.20
Burgas houses little over two hundred thousand people and is an industrial hub in Bulgaria.
7. Bandung, Indonesia
Insider Monkey's Cost of Living Score: 42.7
Bandung houses more than two million people and is known for its concentration of creative small businesses.
6. Bogotá, Colombia
Insider Monkey's Cost of Living Score: 40.25
Bogotá is the capital of Colombia and a tourism center in the region.
