Analysis of the United rb Emirates Enmi - Case Study Example

UNITЕD АRАB ЕMIRАTЕS ЕСОNОMIСS АNАLYTIСАL RЕРОRT Name Course Title Professor’s Name University City (State) Date United Аrаb Еmirаtеs eсоnоmiсs anаlytiсаl rероrt Introduction This analytical report seeks to analyze the macroeconomic performance of United Arab Emirates over the last ten years using a publicly available macroeconomic data and the relevant economic theory (Schenk, 2013). The aspect of macroeconomic performance refers to an evaluation of how well a particular state such as the United Arab Emirates is doing so as to reach its main government policies objectives. The main objective of this particular policy is typically an enhancement in the actual living standard for their production. Macroeconomics performance of a particular country is usually measured using Gross Domestic Product where GDP=AD=C+I+G+X-M model typically gives it. The report will analyze all the factors that measure macroeconomic performance. The aspect of macroeconomics usually takes into consideration the following factors; Prices which are usually measured by the annual change in the consumer index Jobs (employment and unemployment rates Trade balances and also the measures of competitiveness Real GDP Growth in terms of long term and short term Price stability United Arab Emirates economic performance in terms of price stability has been explained using AD-AS Model or the collective demand or supply method because it is a macro-economic model that explains price and output level through the relationship of collective demand and aggregate supply (Ramsay et. Al 2013). The model is based on the theory of John Maynard since it is considered a universal employment, money and the interest theory. How the economy has performed in terms of price stability Using AD-AS Model or the aggregate demand or supply model, the economy of United Arab Emirates has performed very well in terms of price stability because as we understand that the stability of prices is usually an important objective of fiscal policy. When the inflation is high, variable or even both, the aspect obstructs with the proficient operation of the whole financial system and can lead to a reduction in the country’s economic growth. During the year 2012, the United Arab Emirates Federal Open Market Committee précised that its long-run objective for price increases is a 2 % average rate because the policy combined with the previous events that did establish the country’s obligation to a stable and low rate of inflation. Arabs have been enjoying an extended period of price stability because the consumer price inflation has stood at 14.5% since 2004 (Ramsay et. al 2013). Recent figures of inflation, in addition to financial indicators like the bond yields, do not advocate that high inflation is on its way back since the Federal announced a target inflation of 2% in January 2016, the rate of inflation has typically settled below that mark. Instead of fueling a development in bank currency and deposits that might drive inflation up, more of the new currency is being apprehended as surplus reserves with the Federal. Certainly, some individual services and goods have seen considerable increase in prices at diverse times even as general inflation has stayed low. For example, an undergraduate tuition at four-year institutions has increased since 2004 at a rate more than two times as fast as the overall rate of inflation. From 2010 to 2011, average retail petrol prices went up 30 % because of inflation. The Importance of Price Stability The aspect of keeping price stability is one of the three aims legislature defined for the Federal in the Federal Reserve Act, alongside a maximum service and reasonable long-term rate of interest. Inflation is an apprehension of legislatures for excellent reason because it eats into the purchasing power of households cost and efficiently taxes their spending of both services and goods, even if they are not often sensitive to it. Stable inflation creates ineffectiveness as it forces market participants to find diverse ways to keep themselves from value’s decreasing value. Even at reserved levels, the aspect of price increases may eat into purchasing power moderately swiftly (Azadeh et. Al 2011). For instance, at a 6 % inflation rate, money loses half of its value after each twelve years. In fact, even with the reticent inflation rates of the past twelve years, the USD Dollar cumulatively has lost substantial value over time. From the Consumer Price Index data, a dollar in 2004 now values forty two cents in steady dollars that is; it would now buy 42 % of what it would have in bought in 2004. Macroeconomic analysis United Arab Emirates Gross Domestic Product (GDP) How the economy has performed in terms of employment The United Arab Emirates is the world major national economy in nominal terms and considered the second most important according to the purchasing power parity that represents 22 percent of nominal global Gross Domestic Product and 17 percent of the universal purchasing power parity. The United Arab Emirates Gross Domestic Product (GDP) was worth 17,419 Billion US Dollars in 2014. This particular aspect represents 28.10% of the global economy as reported by the World Bank. The United Arab Emirates Gross Domestic Product (GDP) growth has rebounded sharply during 2010-2012 but this particular rebound was short-lived, and the growth accelerated significantly in the following three years. The Gross Domestic Product (GDP) usually measures the national output and income for a given state’s economy because the Gross Domestic Product is generally equal to the total expenditure for all the final goods and the services created within the state in a predetermined period of time (Azadeh et. Al 2011). The table below shows the United Arab Emirates Gross Domestic Product (GDP) – actual values, chronological data, forecasts, charts, and statistics. United Arab Emirates GDP Last Previous Highest Lowest Unit Growth Rate 1.31 3.00 15.51 -8 % Annual Growth Rate 2.00 2.11 13.45 -4.11 % Gross Domestic Product 12,419 16,768.12 17,419. 543.50 US Billion D Constant Prices 16,470.20 16,414. 16,470.75 2,084.40 US Billion D Gross National Product 16,631.40 16,585.30 16,631.45 2,098.30 US Billion D Gross Fixed Capital Formation 2,763.40 2,760.40 2,763.30 1,215.67 US Billion D GDP per capita 46,405.28 45,660.75 46,405.25 15,791.45 US D GDP per capita PPP 52,117.77 51,281.85 52,117.66 36,543.20 US D GDP From Agriculture 205.40 191.20 235.58 123.30 US Billion D GDP From Construction 724.20 706.40 724.50 528.76 US Billion D GDP From Manufacturing 2,187.50 2,165.50 2,187.45 1,679.50 US Billion D GDP From Mining 292.10 335.40 476.85 197.56 US Billion D GDP From Public Administration 2,330.80 2,316.40 2,330.20 1705 US Billion D GDP From Services 12,319.50 12,198.85 12,319.50 8,469.25 US Billion D GDP From Transport 528.40 525.95 528.45 357.40 US Billion D GDP From Utilities 290.70 287.60 296.85 193 US Billion D United Arab Emirates GDP Growth Rate The United Arab Emirates economy extended an annualized 1.4 % on quarter in the last three years from 2012-2015, which is higher than the second estimation of 1 percent, according to closing figures that were provided by the Bureau of Economic Analysis. The customer spending rose more than expected, and the depressing impact from operations came lower than anticipated while the drag from trade stock was bigger too. Gross Domestic Product Growth Rate in the United Arabs averaged to 3.34 % from 2004 until 2015, attaining an all-time high of 16.90 % in the initial quarter of 2004 and a record low of -10 % in the initial quarter of 2009. Gross Domestic Product Growth Rate in the United Arabs is presented by the United Arab Emirates Bureau of Economic Analysis. Consumer spending The United Arab Emirates consumer spending is also referred to as consumer demand or usage expenditure is considered to be the purchasing of products and services by families or individuals since it forms the biggest part of collective order at the macroeconomic level (Ramsay et. al 2013). The macroeconomic factors affecting consumer spending include; Taxes Tax is considered to be a tool in the economy adjustment because the tax policies have been designed by the government to influence the consumer groups, consumer confidence and the spending of the consumer. The aspect of tax usually affects the consumer spending since they usually increase or decrease the consumer’s rate of expenditure. Consumer sentiments Consumer sentiments are considered to be the household’s attitudes and other firm’s towards the general economy and also the general health of the fiscal market because they are regarded as strong components of the consumer spending that affects the country’s GDP. Consumer expenditures in the United Arab Emirates increased to 11,330.70 USD Billion in the year 2015. The aspect of consumer spending in the country averaged 5,175.20 USD Billion from 2004 until 2015 which made the country reach an all-time high of 11,330.70 Billion in the fourth part of 2015 and recorded a minimum of 13.20.40 USD Billion in the initial quarter of 2003. The United Arab Emirates consumer spending is usually accounted by the Bureau of Economic Analysis. United Arab Emirates investment (Gross Fixed Capital Formation) United Arab Emirates Foreign Direct Investment pragmatically refers to the income position without current costs adjustments. The government has invested much in the Oil and Petroleum industries because this aspect forms a clear indication that it will provide the country with sufficient balance of payments. The United Arabs Foreign Direct Investment Foreign Direct Investment in the United Arab Emirates increased by 35,494 US Million Dollars in the fourth part of 2015. Foreign Investment in the United Arab Emirates averaged 22,464.57 US Million Dollars from 2004 until 2015, getting to an all time high of 46,165 US Million Dollars in the second quarter of the year 2011 and a record low of -9,988 US Million Dollars in the fourth quarter of 2006 (Schenk, 2013). Venturing in the United Arab Emirates is usually presented by the United Arab Emirates Bureau of Economic Analysis. United Arab Emirates Government spending Government spending generally refers to the aspect of public expenditure on goods and services, and it is a major component o the Gross Domestic Product. The aspect of government spending policies such as adjustment taxation, budget targets, increasing the public expenditure and public works are considered very useful tools in influencing the economic growth. Government expenditure in the United Arab Emirates rose to 2,870.60 US Billion Dollars in the fourth quarter of 2015 from 2,869.70 US Billion Dollars in the third quarter of 2015 (Al‐mulali et al. 2011). Government Spending in the United Arab Emirates averaged 1,870.10 US Billion Dollars from 2004 until 2015, getting to an all time high of 3,113 US Billion Dollars in the third quarter of 2009 and a record low of 557.10 US Billion Dollars in the first quarter of 2004. United Arab Emirates Exports The United Arab Emirates is considered to be the global third biggest exporter, yet its exports only relates for 13 percent of the Gross Domestic Product. The main exports in the United Arab Emirates include; Capital goods which accounts for 39% of the total exports Industrial supplies which constitute 28% of the total exports Consumer goods (12% of the total exports) Automotive vehicles, engines and part (10.5% of the total exports) Food, beverage and feed (7% of the total exports) The main export partners include Canada (19% of the total exports), Mexico (14% of the entire exports), China (7% of the entire exports), Japan (4% of the entire exports), Germany (3% of the entire exports) and United Kingdom which constitute a 3% of the entire United Arab Emirates produce. Exports in the United Arabs increased 1 % to US Dollars 169 Billion in March from February of 2016 representing a first gain in six months. Sale of products rose USD 1.2 Billion to US Dollars 108.4 Billion, primarily driven by sales of diamonds, user goods, pharmaceutical planning and also other goods and services (Schenk, 2013). The United Arab Emirates Exports to the European Union rose up by 10.2 percent, exports to Canada rose by 6.0 percent, and sales to Mexico increased by 0.9 percent while the exports to China dropped by 2 percent. Exports to the United States of America averaged 49,157.47 US Million Dollars from 2004 until 2015, attaining an all-time increase of 197,759 US Million Dollars in November of 2013 and a record decrease of 572 US Million Dollars in April of 2004. United Arab Emirates Imports The United Arab Emirates is considered to be the second world biggest importer of both goods and services from other nations. The main imports to the United Arab Emirates include; Capital goods which accounts for 29 percent of the entire imports Consumer goods (26 percent of the entire imports) Industrial goods which constitute 24% of the total imports Automotive vehicles, engines and part (15% of the total imports) Food, beverage and feed (5% of the total imports) The main import partners include Shipments from China represent 19% of the total imports, Canada (14.5% of the total imports), Mexico (12 percent of the entire imports), Japan (6 percent of the entire imports) and Germany (5 percent of the entire imports to the United Arab Emirates produce. Imports in the United Arab Emirates went up 1.3 % to 22.5 billion US Dollars in February from January of 2015, rebounding from a 1.25 % drop in the earlier period. The purchases of consumer goods improved 3.6 billion US Dollars, pharmaceutical preparations rose 1.3 billion US Dollars, sporting goods, toys and games went up 0.4 Billion US Dollars while automotive vehicles and engines parts declined 1.3 Billion US Dollars and passenger vehicles fell 1.3 Billion US Dollars (Al‐mulali et al. 2011). Imports in the United Arab Emirates averaged 62,488.87 Million US Dollars from 2004 until 2015. This aspect reached an unprecedented high of 240,524 Million US Dollars in December of 2015 and a record little of 577 Million US Dollars in May of 2004. Ramsay, R.J., Sinason, D.H., Strawser, J.R. and Thibodeau, J.C., 2013. Auditing and assurance services. New York, NY: McGraw-Hill/Irwin. Al-Tamimi, H.A.H., Alwan, A.A. and Abdel Rahman, A.A., 2011. Factors affecting stock prices in the UAE financial markets. Journal of Transnational Management, 16(1), pp.3-19. Schenk, R., 2013. Gross Domestic Product. 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On Capital Flows and Macroeconomic Performance: Evidence Before and After the Financial Crisis in Turkey. In ERF 17th Annual Conference in Turkey, 20th-22th March. Read More