DUBAI, June 26 (Xinhua) -- A study released on Tuesday said living cost has declined for foreign workers in Abu Dhabi and Dubai, the two biggest cities in the United Arab Emirate (UAE).

Both cities dropped sharply in the ranking of the most expensive places to reside, English-language news service the National reported, citing the latest "Annual Cost of Living Survey" by global consultancy Mercer.

Abu Dhabi, UAE capital, dropped from the 22nd to the 40th, and Dubai from the 19th to the 26th most expensive city.

But Rob Thissen, a senior associate of Mercer in Dubai, said the fall has to be seen in relation to other global cities despite a lower cost of living in the two UAE cities.

"If the ranking goes down, it does not necessarily mean the cost of living is going down," he was quoted as saying.

For instance, one liter of motor spirit costs 0.61 U.S. dollars in Dubai compared to 0.7 dollars in New York and 1.65 dollars in London.

According to Mercer's research, inflation in the UAE has risen between 3.5 percent to four percent over the past 12 months, mainly because the Gulf state has introduced a five-percent value added tax (VAT) since Jan. 1.

In order to ease the pressure on the living cost due to the VAT, the UAE government has slashed a number of fees for businesses and private individuals in June, including property registration fees, and municipality fees on hotels and restaurants.