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Economies of the UAE
Economics of the UAE
Current analysis of UAE Economy
Historical economic aspects
Discussion of basic economic indicators
GDP: per capita GDP; growth rate of GDP
Natural / Human resources & Infrastructure
Exchange Rate Behavior and Forecasting
Demographics (age distribution)
Short-term and long-term prospects/forecasts for UAE Economy
Current analysis of UAE Economy:
The Persian Gulf states including Abu Dhabi, 'Ajman, Al Fujayrah, Ash Shariqah, Dubayy, Umm al Qaywayn, and Ra's al Qaywan are represented as UAE. The states follow an open economic and moderate political policy. The states are rich in oil reserves providing a structured support for their economic and social progress. The strong economic position of the states has enabled them to earn a competing position with the developed western countries. The continuous growth in economy has also enabled the businesses to invest in UAE. The governments of UAE are focused to increase foreign investment after surviving through the 2008-2009 economic meltdowns. The major causes of economic down turn was initiated from international markets and later continued due to fall in oil prices and real estate investments (Elbadawi, 2012).
Historical economic aspects:
UAE has gained rapid growth since the exploration of oil in the region. It has related heavily on the oil exports. However, after the recent economic crisis the country has reduced its oil-based economic reliance up to 25%. The signing of Free Trade agreement for foreign investors with United Sates in 2004 has also played its part in increasing the economic activity. The foreigner investors are offered 100% ownership and no taxes. The issues with real estate crisis during the recession have affected Dubai and it was financially supported by Abu Dhabi during the turbulent times. The states in UAE are focusing their attention on diversification in option to stabilize its economic growth. The incentives for increasing presence of local representatives in governance, education, and private sector employment opportunities have played a significant role in reviving the economy from recession since 2009.
Discussion of basic economic indicators:
The basic economic indicators provide help in understanding the overall macroeconomic conditions of the country. The UAE economy is regulated and documented. It is also presents information about the economy through various e-governance initiatives. The states have also gained economic position among the neighboring region due to its open trade policies. The fluctuation in GDP growth indicates slight uncertainty of economic conditions in the region. There are various challenges to progress, however, the competitive polices to facilitate growth can help in creating a favorable situation.
GDP: per capita GDP; growth rate of GDP:
The per capita GDP has increased gradually over the last three years. It is $49,800 for 2012, $49,400 for 2011, and $48,800 for the year ended 2010. The total GDP of UAE as of 2012 is $358.9 billion according to the official exchange rates. The country is facing a decline in the real GDP growth as compared with the year 2011. It has increased in comparison with the real GDP growth in 2010. The GDP real growth rates are 3.9%, 5.2% and 1.3% for the years 2012, 2011, and 2010 respectively. The country is ranked 87 in the word in terms of GDP, according to CIA (2013).
The rate of inflation in the country is 0.7% with the world ranking of 11. The inflation rate is constant at 0.9% since the year 2011. The low inflation rate in UAE is due to the government policies. The government has established a policy to control the consumer goods prices (CIA, 2013).
UAE had budgeted revenues of $130.3 billion and expenditure of UAE amounted for $114.2 billion in 2012. The budget surplus of 4.5% of the GDP for UAE in year 2012 was observed. The taxes and other revenues to GDP ratio is 36.3% of the GDP. The tax to GDP ranking of the country is 15 in the world. The public debt is 43.3% of the budget in 2012 as compared to the 46.5% of the GDP in 2011 (CIA, 2013).
UAE has exports of $300.9 billion in 2012 as compared with the $281.6 billion in the previous year. The imports of $220.3 billion and $202.1 billion were observed in the years 2012 and 2011 respectively. The major import partners of the country are India with 17%, China with 13.8%, United States with 10.5%, and Germany with 5.2% and Japan 4.2%. The country imports machinery, transport equipment, food and chemicals. The exports of the country include crude oil as 45% of its major commodity. The other exports include gas, re-exports, dried fish, and dates. It is also important to note that the country has a contribution of 0.8% for agriculture, industry has 56% and services are 43.2% in the total GDP. The agriculture products include dates, vegetables, watermelons, poultry, eggs, dairy products, and fish. The industries are mainly concerning petrochemicals and petroleum, fishing, aluminum, cement, fertilizers, construction materials, handicrafts, and textiles. The industrial production growth rate is 4.2% as of year 2012 (CIA, 2013).
Natural / Human resources & Infrastructure:
The country has 43 airports, 4,080 km of roads, and pipelines of 3,277 km for gas, 300 km for liquid petroleum gas, 3,287 for oil, and 99 km for water as of 2013. There are four major ports in the country (CIA, 2013).
There are six major sea ports in the country providing facilities for large and small shipping companies a hub for their transportation needs. The sea freight business in UAE also generates an economic activity for the region.
The states are rich in natural resources and oil is the major produce of the region. The oil rich states have also developed their infrastructure to explore and export crude oil and natural gas as the major commodity. The oil refineries working in several states also refine oil for local use and exports. The natural resources of gas are also used locally and exported in the form of liquefied natural gas (LNG) to other countries. The availability of energy sources provides leverage for UAE to establish a long-term economic prospect. The country has minimized its emphasis on oil experts and developed a strategic focus to diversify its economy (United Arab Emirates, 2013).
The second major contributor to country's economy is the services sector. The services sector is mainly comprised of highly technical and educated professional expatriates. The country has a large number of multinational organizations operating as offshore business entities (Ramamurti, & Singh, 2009). The major element of interest for these companies to operate in UAE is related to the geographical placement as well as the technologically advanced infrastructure of facilities. The GCC countries also offer a large number of benefits to the foreign investors through minimal taxation on their incomes. The tax benefits as well as a political stability in the states have encouraged investment in the country.
The multinational organizations usually employ local nationals and expatriates to provide services. The services sector mainly provides support for corporate and government sector. The major areas of services include financial, technical, and consultancy to various industry sectors. The major portion of the services sector individuals is from countries like United Sates, United Kingdom, Gulf countries, India, and China. However the government is taking keen interest in developing expertise of local nationals through various education and professional initiatives (United Arab Emirates, 2013).
Exchange Rate Behavior and Forecasting:
The local currency is Emirati Dirhams (AED) and the exchange rate behaviors of the currency in relation to United Sates Dollar are stable since 2008. The exchange rate was held constant at 3.673 during 2012, 2011, and 2009. While it only observed slight change during 2010 and 2008 at 3.6725. The states have a fixed exchange rate policy and it is controlled through governed policy.
Demographics (age distribution):
The population in UAE is 5,473,972 as of July 2013. The country has an overall
The country is ranked at number 115 most populated countries in the world. The age distribution of the population is divided in five categories. The age distribution reflects that 20.6% of the population is 0 -- 14 years, 15 -- 24 years age bracket is 13.8%, 25 -- 54 years of inhabitants are 61.5%, 55 -- 64 years are 3.1%, and 1% are above 65 years. The country spends 1.1% of the GDP on education (CIA, 2013).
Short-term and long-term prospects/forecasts for UAE Economy:
The country has created a political and economic integration through formulating a council of common interest named as Gulf Cooperation Council generally known as GCC. The interests of the region are served through an integrated policy formulated in the GCC countries council. The phenomenal economic growth is attained through sustained operations in construction and providing a free platform to foreign investment. The countries have not only helped the northern states that are not economically sound but at the same time it has generated economic stability in the region.
The economic stability of the region also requires political stability in the region. The Middle…[continue]
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