MANILA may be one of the cheapest cities to live in but it also has the one of the lowest wage and purchasing power levels in the world, a global financial services group said.

Manila retained its ranking as the second cheapest city in a list of 73 cities this year, according to the UBS Prices and Earnings report released yesterday.

The Philippine capital scored 45.3 points on the index, based on the cost of a weighted basket of 122 goods and services. New York was used as the base city with the index set at 100 points.

The UBS findings follow the Economist Intelligence Unit’s Worldwide Cost of Living 2011 report released last month, which placed Manila among the 10 cities with the lowest cost of living

Socioeconomic Planning Secretary Cayetano W. Paderanga, Jr. yesterday attributed Manila’s ranking to "controlled" inflation, which stayed steady at 4.6% in July, within the 3-5% target range of the Bangko Sentral ng Pilipinas.

Only Mumbai bested Manila in the UBS report and was judged as the cheapest city to live in, with 40.2 points. Delhi (49 points), Nairobi (50.4 points) and Cairo (50.5 points) were also among those with the lowest price levels.

On the other end of the spectrum, Oslo (139.1 points), Zurich (135 points), Geneva (133.1 points), Copenhagen (118.4 points) and Stockholm (117.5 points) were cited as the most expensive cities.

UBS conducts the worldwide Prices and Earnings survey every three years, with the latest edition in 2009. The reports are updated yearly to take into account changes in the market.

"Since 2009, the US dollar has slipped by more than one quarter against the Swiss franc, the euro is down roughly 20% on the Swiss franc from two years ago ... while the Australian dollar appreciated against the US dollar by more than 40%," UBS said in the latest report.

Sydney as a result jumped to become the 7th most expensive city to live in, from 12th place last year and 38th place in 2009.

"This is in contrast to the American cities we surveyed which now hold much lower positions. The most expensive American city is New York, occupying rank 14. Typically, New York was featured in the top ten in the past. This can be attributed to the general depreciation of the US dollar versus the world’s other currencies," the report states.

Moreover, the UBS report ranked Manila as second city with the lowest wages, garnering only 7.4 points, unmoved from last year.

Mumbai was again the lowest (6.9 points), while Nairobi (8.4 points), Jakarta (8.7 points) and Delhi (9.5 points) joined it at the bottom of the rankings.

Zurich (144.1 points), Geneva (138.8 points), Copenhagen (134.8 points), Oslo (116.9 points) and Sydney (111.3 points) paid the highest wages.

The list is calculated based on the hourly wages of 14 professions, after the deduction of taxes and social security contributions.

In terms of purchasing power, Manila (19.3 points) placed as the third lowest city, the same position it occupied last year.

Jakarta (15.2 points) and Nairobi (18.2 points) had the least purchasing power, UBS said. Just above Manila were Mexico City (20.4 points) and Mumbai (21 points).

Zurich (110.5 points) boasted of the highest purchasing power, followed closely by Sydney (109.5 points).

They were joined by Luxembourg (107.6 points); Miami (104.8 points) and Los Angeles (104.7 points).

"Manila has low wages because our wage-setting process takes some time. If there is no scheduled petition, there will be no changes," National Competitiveness Council co-chairman Guillermo M. Luz explained yesterday.

The recent hikes in food and oil prices could have affected the purchasing power of Filipinos too, he said.

Manila also suffers from low participation in the economy, University of Asia and the Pacific economist Cid L. Terosa said.

"There are too many unproductive and underemployed people," he said.

Mr. Terosa, however, was confident that recent economic gains made by the country would be reflected in upcoming world competitiveness rankings.