How much does a Big Mac cost in Arab countries?

The latest Big Mac Index reveals significant undervaluation of Arab currencies compared to the US dollar, highlighting disparities in purchasing power parity (PPP) across the region. The index, created by The Economist in 1986, compares the price of a Big Mac burger across different countries to measure currency valuation using PPP theory. This theory suggests that exchange rates should adjust so that a basket of goods, including a Big Mac, costs the same in different countries when expressed in a common currency.

Key Findings:

• Egypt has the cheapest Big Mac at 120 Egyptian pounds ($2.47), indicating a 56.6% undervaluation of the Egyptian pound.
• Lebanon has the most expensive Big Mac at 460,000 Lebanese pounds ($5.13), showing a 9.7% undervaluation of the Lebanese pound.
• Saudi Arabia: The Saudi riyal is 11% undervalued with a Big Mac costing SR19 ($5.06). Adjusting for GDP per capita, it is 1.8% overvalued.
• UAE: The dirham is 13.9% undervalued with a Big Mac priced at 18 dirhams. After adjusting for GDP per capita, it is 8.4% undervalued.
• Bahrain: The dinar is 20.8% undervalued with a Big Mac costing 1.70 dinars. Adjusted for GDP per capita, it is 9% undervalued.
• Kuwait: The dinar is 19.5% undervalued with a Big Mac priced at 1.40 dinars. After adjusting for GDP per capita, it is 9.1% undervalued.
• Oman: The Omani rial is 30.2% undervalued with a Big Mac priced at 1.53 rials. Adjusted for GDP per capita, it is 18.6% undervalued.
• Qatar: The riyal is 32.4% undervalued with a Big Mac costing 14 riyals. Adjusting for GDP per capita, it is 38.4% undervalued.
• Jordan: The dinar is 38% undervalued with a Big Mac priced at 2.50 dinars. After adjusting for GDP per capita, it is 21.8% undervalued.

Observations:

• The consistent undervaluation of these currencies reflects ongoing regional economic imbalances and challenges in currency valuation.
• The Big Mac Index offers a straightforward comparison but does not account for all economic variables, such as local cost structures and income levels.

Overall, the index underscores significant disparities in purchasing power across Arab countries, with most currencies showing undervaluation against the US dollar.