Economic Analysis of United Arab Emirates Essay Sample
The undermentioned subdivision provides inside informations sing the economic environment nowadays in the United Arab Emirates. The economic indexs listed below aid us conclude what province the economic system is in and whether or non a Harris enlargement into the UAE is a good concern determination. Overall. the UAE has an economic system that is comparable to that of the United States. This is good for Harris because there will be less hazard traveling into a hardy economic environment. The UAE dirham is pegged to the currency of the US and has non fluctuated in many old ages. This reduces much of the exchange rate hazard that Harris would usually confront as a company looking to spread out internationally. As demonstrated below. the UAE is an economically stable state that has good trade dealingss with the US and has a strong and capable work force. Historical Economic Aspects – The Discovery of Oil
The United Arab Emirates ( UAE ) formed in 1971 after obtaining its independency from Britain. Before the 1950s’ find of oil. the UAE’s economic system greatly relied on fishing and was stuck in a worsening industry. The oil find transformed an undeveloped. destitute part into an upscale modern province with a high criterion of life. In 1962 Dubai became the first of the emirates to get down exporting oil. Since so. the country’s society and economic system have transformed ( “United Arab Emirates. ” 2012 ) . The president of the UAE at its beginning. Sheikh Zayed. was speedy to prehend the potency of the oil industry. Zayed supervised the emirates and concentrated oil grosss into bettering health care. instruction. and the national substructure. The turning oil industry affected the population of the UAE by pulling a big entry of foreign workers. Together with the colonials. these aliens now make up three fourths of the population. The find of oil has allowed the UAE to develop into one of the Middle East’s most of import economic centres ( “United Arab Emirates. ” 2012 ) . Description of the Economy
GDP
The UAE’s gross domestic merchandise per capita has remained reasonably steady since 2009. In US dollars. the GDP per capita was $ 48. 900 in 2009. $ 47. 900 in 2010. and 48. 800 in 2011. The 2011 estimation ranks the UAE as figure 12 compared to the remainder of the universe ; this is merely one topographic point below the United States with $ 49. 000 GDP per capita. The world’s GDP per capita is estimated at $ 11. 800 for 2011. UAE’s norm is good above the universe norm ( “The World Factbook: . ” 2012 ) . See figure 1 in the appendix for a graph plotting the comparing of GDP per capita between the US. UAE. and universe.
As one of the primary indexs of economic public presentation. we can utilize UAE’s GDP per capita to see that the state is making really good. By comparing UAE’s GDP to the US’s GDP we can see that the UAE is executing every bit good as the United States in its enterprises. By ranking 12 out of 226 states. the UAE is surpassing 214 states in footings of productiveness and economic public presentation ( “The World Factbook: . ” 2012 ) . With the exclusion of a few hiccough. the UAE’s GDP has increased steadily since the 1970s. Figure 2 in the appendix shows the addition in GDP from $ 14. 7 billion in 1975 to $ 360. 2 billion in 2011 ( Google. 2012 ) . As figure 3 in the appendix demonstrates. the UAE’s GDP is steadily increasing. but the state ranks low on the charts compared to the United States and the universe. The crisp diminution in GDP in 2009 should non negatively act upon the chances for the UAE’s hereafter success because the universe as a whole experienced a lessening due to the planetary fiscal crisis ( Google. 2012 ) . Assorted Ratess
Inflation Rate
In 2011. the rising prices rate in the UAE was low at 0. 9 per centum. The UAE ranks at figure 8 when compared to the universe and has less rising prices than the United States who has a 3. 10 percent rising prices rate. A low rising prices rate indicates that there is small diminution in the buying power of the money in the UAE. Although a low rising prices rate is good for a state and its consumers. altering rising prices rates cause uncertainness. Because of the volatility of the informations. we must see the stableness of the rates in add-on to the rate at a given point in clip. By looking at figure 4 in the appendix. we can see that the UAE’s rising prices rates are non steady. nor have they of all time been. Fluctuating rates make it hard for us to estimate the hazard involved with puting in the UAE. The rising prices rate was low in 2011 but in 2008 was at 12. 2 per centum ; this shows how rapidly the rate can fluctuate ( Index Mundi. 2011 ) . The high rising prices rate diminishing buying power. increases involvement rates. lowers fight. and leads to high uncertainness and labour agitation ( eToro Online. 2012 ) . Unemployment Rate
The unemployment rate in the UAE has easy. but steadily. increased since 2007. It was at 3. 45 per centum in 2007 and has now increased to 4. 6 per centum today. Compared to the United States’ leap from 5 per centum in 2007 to 7. 8 per centum presently. the UAE looks good. A low and balanced unemployment rate indicates an economic system that is runing at capacity ( Trading Economicss. 2012 ) . Rate of Industrial Production
IPI measures the sum of end product from the fabrication. excavation. electric. and gas industries. An increasing IPI is a mark that companies in an industry are executing good. The UAE’s IPI is 3. 2 per centum and is comparable to the United States’ IPI at 4. 1 per centum ( Index Mundi. 2011 ) . This is a good rate to look at depending on what type of house programs to put in the UAE. Government Budget Deficit
The UAE authorities is running a budget excess of 5 per centum of GDP. UAE should hold few jobs raising financess to finance outgos ( “The World Factbook: . ” 2012 ) . This is good concern for a house looking to spread out into the UAE. Trade
The UAE has been a member of the World Trade Organization since 1996 and supports unfastened trade. The UAE has stable trade dealingss with states throughout the universe and has emerged as a cardinal international trade centre between the East and West. The UAE’s primary exports are rough oil. natural gas. re-exports. dried fish. and dates. Its primary imports are machinery and conveyance equipment. chemicals. and nutrient ( Embassy of the United Arab Emirates. 2012 ) . Charts 5 and 6 in the appendix from sum up the UAE’s top five import and export trade spouses. Natural Resources
The UAE is home to the world’s fifth-largest natural gas militias and holds 10 per centum of the entire universe supply of conventional oil militias. These militias provide a steady production of rough oil in the UAE. Figure 7 in the appendix compares the sum of oil produced versus the sum consumed by the UAE. The big sum of oil production will let the UAE to go on to be a top export spouse between the East and West ( Index Mundi. 2011 ) . The UAE ranks 7th amongst the universes proved oil militias and natural gas militias ( “The World Factbook: . ” 2012 ) . The UAE besides has good national trade dealingss. The demand for rough oil mixed with the support of unfastened trade. makes the UAE a dependable topographic point of pick for carry oning concern. Trade dealingss with the United States
The UAE and U. S. have outstanding trade dealingss. Three old ages in a row. the UAE has been the largest export market in the Middle East for the United States ( “The World Factbook: . ” 2012 ) . The relationship between the U. S. and the UAE is one of the most valued for the UAE. More than 30. 000 Americans call the UAE place and 750 American-owned concerns enjoy the chances of growing and enlargement offered by the UAE ( UAE Ministry of Foreign Trade. 2011 ) . The solid relationship between the two states is expected to go on and will supply reciprocally honoring concern chances for both states. Demographics
The UAE has a strong labour force of 4. 111 million people. 85 per centum of which are exiles ( “The World Factbook: . ” 2012 ) . The labour engagement rate. the proportion of the population that is economically active. has been steadily increasing in the UAE since the early 1890ss ( Google. 2012 ) . The majority of the population in the UAE is comprised of people between the ages of 15 and 64. The population is turning at a rate of 3. 055 per centum per twelvemonth. lending to a uninterrupted supply of labour. However. the degree of instruction amongst the population is reasonably low. Of ages 15 and over. 77. 9 per centum of the population can read and compose. The school life anticipation from primary to third instruction is an norm of 13 old ages ( “The World Factbook: . ” 2012 ) . The low degree of instruction sends up a ruddy flag for concern outgos in the UAE because it doubts whether or non there are plenty educated working people to run into the demands of concerns. Prospects for United Arab Emirates’ Economy
The short-run prognosiss for the UAE expression positive. The GDP is increasing at a steady rate and the state has experienced important economic growing. The UAE has earned its topographic point as an of import provider of energy and will go on to be one until the militias run dry. The UAE is developing and diversifying its economic system so it will stay a stable trading spouse later in life. Trusting on oil is working for now. but the variegation plan the UAE late launched will transform the economic system to one based on cognition. engineering. and skilled labour. This launch will stabilise the UAE’s economic system for long-run success ( Embassy of the United Arab Emirates. 2012 ) . The involvement in engineering and skilled labour is particularly assuring for enlargement to the UAE by Harris Corp. Harris’ huge merchandise line will open the doors for many new economic stabilizers and supply the foundation for the start of a stronger economic system. Once Harris establishes creditability. there will be an increased demand for the skilled labour force the UAE supports.
The authorities has begun puting to a great extent in more renewable sectors such as aluminium production. touristry. air power. re-export commercialism and telecommunications. The variegation will make trade chances that will last for old ages to come ( Embassy of the United Arab Emirates. 2012 ) . From an economic base point. the UAE is really comparable to the United States. In multiple countries of economic indexs. the UAE outperforms the United States. The UAE has besides built a strong relationship with the United States and every bit long as it fosters this connexion. the relationship should go on to profit the UAE. The UAE has come a long manner since its find of oil. and with the advanced programs it has. we should see continued economic growing and sustainable long-run success. Exchange Rate Behavior and Forecasting
History
The United Arab Emirates formed in 1972 when six provinces merged to organize one state. Prior to the formation of the UAE. the provinces did non hold their ain currency so they used other foreign currencies. With the formation of the UAE. the UAE dirham was made the official currency of the state. At first the United Arab Emirates currency board issued the currency. but since 1982 merely the United Arab cardinal bank has the authorization to publish currency. Since 2002. the UAE dirham has been officially pegged to the U. S. dollar ( CRN India ) . At its initiation in 1973. the exchange rate of the UAE dirham to the U. S. dollar was 1 US dollar=3. 94737 AED. Below is a timeline sum uping the currency alterations.
Structure
The Emirati dirham is divided into fractional monetary units called fils. One unit of the currency can be divided into 100 equal fractional monetary units. For denominations smaller than one dirham coins are issued in six different face values: 1. 5. 10. 25. 50 fils and 1 dirham. The scratching on the coin is in Arabic numbers and linguistic communication. For denominations above one dirham. bank notes of the currency are issued. The bank notes are issued in 8 denominations: 5. 10. 20. 50. 100. 200. 500. and 1000 dirhams. The front sides of the bank notes are printed in Arabic numbers and linguistic communication. The back side of the notes are printed in Hindu Arabic numbers and the text is in English ( CRN India ) . The Dirham and the U. S. Dollar
The current exchange rate between the U. S. dollar and the UAE dirham is 1 U. S. dollar=3. 67 UAE dirham. The exchange rate has non fluctuated much since its initiation. The fixed rate with the United States has non been really advantageous for the UAE recently because of the deprecation of the U. S. dollar. The depreciation is negatively impacting the buying power para of the dirham against other currencies. Below is a chart from Google plotting the one-year norm of the UAE dirham relation to its exchange rate value to the U. S. dollar. As celebrated above. the exchange rate is really stable and has non fluctuated much since 1973 when the dirham became the official currency of the UAE ( Google. 2012 ) .
It seems that nail downing its currency to the U. S. is working for the UAE. The UAE’s economic system is little. unfastened and is exposed to nominal domestic dazes ensuing from big pecuniary enlargement. Because of these volatilities. the pegged currency helps protect the value of the dirham and helps maintain rising prices in cheque. The stableness of the currency makes for simplified trade with its spouses. particularly the U. S. Along with trade spouses. the pegging of the dirham to the dollar is good to possible investors and diminishes much hazard. Currency Forecast
As it stands. and has stood for the past 30 old ages. the dirham is a stable currency and has a consistent exchange rate with the United States. Give the history of the currency. the following six months holds no alteration for the currency. The UAE has figured out a system that works for them. and should non alter it anytime in the close hereafter. This being said. the currency should still be keeping steady at its current fixed exchange rate with the United States in the following twelvemonth. Some research suggests that the increasing variegation of the UAE’s economic system will justify a switch to flexible exchange rates in the hereafter ( Department of Finance. 2010 ) . Three old ages should be adequate clip for the UAE authorities to flip around the thought of a flexible exchange rate and recognize that it’s non for them. Realistically. I don’t see any currency alterations for the UAE in the close hereafter.
