Israel Ranks Second Most Expensive in The Economist's 'Big Mac Index'
Israel has reached second place globally in The Economist's Big Mac Index, trailing only Switzerland. The 25% jump in dollar-denominated prices is driven by the strengthening of the shekel to 3 NIS per dollar.
It is expensive here. Israel is ranked second, right after Switzerland, in the international comparative food cost index that the British weekly The Economist has been conducting for 40 years.
The index, launched in September 1986, about a decade before McDonald's entered Israel, reflects the price of the company's flagship dish, the "Big Mac," in dozens of countries around the world. The local price is divided by the US dollar exchange rate, and thus deep gaps are created: for example, a Big Mac in Israel costs $7.67, in the USA $6.22, and in distant Taiwan only $2.42.
What do these gaps express? Both the relative expensiveness of local food and the dollar exchange rate in terms of local currency. At the beginning of its journey, The Economist's index was used mainly as evidence of price gaps between developed and expensive countries and developing and cheap ones. In the recent period, which has been turbulent in the financial markets, the ranking reflects the over-appreciation or over-depreciation of the local currency against the dollar. A sharp depreciation of the local currency — meaning the dollar becoming more expensive — immediately lowers the dollar price of a Big Mac, and conversely, the appreciation of the currency makes it more expensive.
As the editors of The Economist write in an article dedicated to the 40 years of the Big Mac index: the phenomena of extreme currency appreciation and extreme currency depreciation are as common today as they were then. Overwhelming evidence that the international exchange rate system is in a state of constant disequilibrium. Israel is an example of this. Two years ago, at the end of July 2024, when the dollar exchange rate was about 3.8 shekels, the Big Mac in Israel was ranked by The Economist as much cheaper than in leading Western countries. But when The Economist's editors collected the data for the latest ranking table, the dollar exchange rate in our parts was 3 shekels, and the dollar price of a Big Mac meal jumped by a quarter. Tel Aviv has returned to leading in the expensiveness of hamburgers, and not just for adults.
The editors of The Economist chose the Big Mac as a representative and internationally comparable food item because of its uniformity and because of its diverse production composition. Labor costs contribute 45.5% to the price of the dish, bread 12%, meat 9%, rent 4.5%, electricity 5%, and so on. The increase or decrease in the price of any of these components affects the price for the consumer — hence its usefulness for an initial assessment of the local cost of living.
Israel's high place in the international food cost ranking is not limited only to McDonald's meals. Israel is also very expensive in indices published by international economic institutions and research divisions of global banks. Deutsche Bank has just published its annual price comparison for 2025, according to which Tel Aviv is ranked 11th among dozens of large world cities in the grocery cost index. According to the rankings of the OECD and the International Monetary Fund, we are at the top of the cost of living, in second place after Switzerland. In 2005, according to the same studies, we were in 21st place on the cost of living scale in developed countries.
Furthermore, according to an original Israeli study by Dr. Sarit Menachem-Carmi, a senior research director at the Aaron Institute for Economic Policy at Reichman University, the price level of the food basket in Israel in 2005 was relatively low compared to five small and rich European countries (Austria, Denmark, the Netherlands, Finland, and Sweden) and remained so until 2009. Now the relative prices of the food basket are 27% higher than the average of these countries. In her research, Dr. Menachem-Carmi details the reasons for this jump, from kashrut and VAT to bureaucratic barriers to competition. But above all, there was and is one institution responsible for national economic policy — the government that ruled during this period.
