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Why it is expensive to live in Ukraine

It is no secret food and life generally are quite cheap in UA, if you translate cost of living in Ukraine in US dollars, compare them to affluent neighboring countries. But the seeming cheapness is completely offset by low wages.

Is Ukraine expensive to live in? As of summer 2020, Ukraine was at the end of  table and took 121st place out of 135. Egypt, Syria, Georgia, Uzbekistan, India, Pakistan and others were ranked lower in cost of living. It turns out that through almost all European countries cost of living is 150% higher than in our country.

Cost of living in Ukraine

In Ukraine, rent in major cities reaches $ 307, for “utilities” need to pay 94 “green”. In transport, you can ride in our country for $0.25, and gym membership/ month can be bought only $17.25. Single trip to cinema will total $3.6 to Ukrainians, when cup of cappuccino is $1.04.

In neighboring Poland, rent costs $566, utilities – $183, single trip on public transport – $0.91, meal in restaurant – about $6.6, and cup of cappuccino – $2.35. Hungary is similar to Poland in terms of prices. The average salary here is about $785, rent is $426, and “communal” – $170. Gym membership there be $37.8, when trip to movies will be $6, media report. Finally:

  • Switzerland is considered the most expensive to live in.
  • Here renting one-bedroom apartment will total about $1,658, utilities – $218.
  • One has to pay almost $4 for a trip to public transport, while a meal at a restaurant – $27, cappuccino will be $5.

Ukraine has some of lowest prices to food, alcohol, cigarettes. This is where benefits stop. It has lowest average salaries – about $346. In Poland the figure is $851, in Hungary it is $785 and in Switzerland it is $6,109.

Minimum age pension in Poland is 1 200 zlotys. It was raised in June. This is a little more than 8 800 hryvnia, or $323. In UA, minimum pension is 1,712 hryvnia, which is 5 times less.

Food prices

As to food prices, they are indeed much lower in UA. Problem is that Ukrainians spend 42% of their income on food, when Europeans spend no more than 15%. Thus, Poles spend 17%, Czechs – 16%, Norwegians – 13%, and Germans – 10%. This is Eurostat data for 2017.

One of the reasons for such “wastefulness” is the incorrect calculation of minimum food basket (MPK). In UA they do not revise it, if they do, they do not change its contents. Wages, pensions, social benefits all depend on value of  MPK, it is not surprising its value is significantly understated. By the way, the Economic Discussion Club calculated value of the IPC of July 2020. To able-bodied person this amount is 1869 hryvnia, or 85% of subsistence level to this population category. To persons who have lost the ability to work – 1476 hryvnia, or 86% of subsistence minimum level to this population category.

Cost of fruits, vegetables in UA is higher than in Europe.

We should not exclude strongest tax pressure. Polish legislation provides differentiated rates of value added tax (VAT) to various goods, stressed in media deputy head of analysis of real, fiscal sectors of the Monetary Policy and Economic Analysis Department of NBU Tatiana Yukhimenko. Lowest rates are to basic foodstuffs. Bread, meat, dairy products, vegetables, fruits – rate is 5% (for imports – 8%), when most other products – 23%. Since April 1, VAT rate to most imported food products in Poland was to be reduced to 7%, citrus fruits –  5%. Due to measures against coronavirus, Polish government postponed tax changes until July.