Introduction of Economics For Finance Business And International Trade Assignment
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Economic development of a country refers to programs, policies, and activities to improve economic health and quality of population. Economic development can be understood from the HDI, per capita, industrial development of a country. This report will discuss the economic development of the United Arab Emirates (UAE) which is situated in Western Asia.
Economic Development of UAE
UAE is a country in the Middle East and it is one of the largest oil exporters in the world. Their economy was largely dependent on oil a few years ago. They started to diversify their economy in the last few years. Their economy has been developing for a long time due to the oil economy and the passionate decisions and policies of the leading country. Primary indicators for identifying the economic development of a country are Gross Domestic Product, Gross Domestic Per Capita, Economic growth, inflation, unemployment and so on (Bbc.co.uk, 2022).
GDP of UAE
(Source: Statista.com, 2022)
GDP of a country refers to the total production of a country within its border in a specific year (Wang and Sun, 2021). Figure 1 helps to identify that the GDP of UAE is increasing from 1986 through some of the year's negative GDP growth yet the economy recovers GDP condition and moves toward improvement. This data indicated that the economy is developing due to this reason production and growth of the country increased and it will increase soon. Primary reason behind increasing GDP is the large amount of oil export, development of tourism business, airlines business and other manufacturing and service sectors in UAE. All these factors help to improve whole economy.
GDP Per Capita
(Source: Statitsia.com, 2022)
GDP per capita is another indicator for evaluating economic development of a country. GDP per capita refers to earnings per person in an economy (Moiseev et al. 2020). High and increasing per capita refer economy is developing because income per person cannot be possible to increase without development. GDP per capita of UAE is increasing since 1986 as well as their increasing GDP. Another important point is that the population of UAE has increased in large numbers between this year yet GDP per Capita did not negatively impact. Dark Side of the UAE economy is its wealth gap ratio (Borgenproject.org, 2022). According to researchers, the wealth gap of the UAE is very high and many people still live in poverty. Primary reason is negligence of migrant workers and people. Scope of development and increase of wealth preliminary limited up to native UAE people and rich immigrants. Economic development negatively impacted this area though the government is still working on this area for improving the condition.
(Source: Statitsia.com, 2022)
The inflation rate of a country refers to the level of goods and service prices that increased within a certain period (Musarat et al. 2021). The inflation rate negatively impacts economic development because purchase power of individuals decreases and value of return of investment also decreases. According to some researchers and studies, the inflation rate below or at 2% is acceptable for the economy (Federalreserve.gov, 2022). Figure 3 suggest that the inflation rate of UAE's maximum time moved around 2% and from 2019 it was near and up to 2%. This data indicated that government positively control serving of UAE and it is sign of economic development.
(Source: Statitsia.com, 2022)
Unemployment rate of countries indicates the condition of the economy because unemployment rate is low in developing countries whereas it is high in underdeveloped countries (Singh, 2018). Unemployment rate of the UAE was lowup to 2019 and it will increase in 2020 due to COVID 19. Minimum unemployment rate indicates that people have jobs and income which ultimately indicate that the economy is developing.
Openness of UAE Economy and Benefit of This Openness
UAE is an open economy and it is one of the best economies in the world (Uae-embassy.org, 2022). UAE opened their economy for a long time to welcome business and trade. UAE is a popular country for becoming a strategic hub due to business-friendly free zones and fast-developing economy. The GDP of UAE is 358.869 USD in 2020 and it reflects rich natural resources along with 10 per cent oil trade supplies and fifth-largest natural gas reserves (Uae-embassy.org, 2022). According to data from the World Bank, oil rent covers 16.198% of the total GDP of the country and the country is reducing its dependence on oil-based economy for a long time (Data.worldbank.org, 2022). Trade openness refers to the perception and action of a country regarding international trade such as imports and exports of the economy. In addition, the rules of a country regarding trading with the outside of the world. According to the World Trade Organization trade regime of the UAE opens along with low and non-tariff barriers for the trailers (Wto.org, 2022).
According to the Heritage Foundation rating, UAE is the 33rd country out of all countries based on free scores (Heritage.org, 2022). This organization stated that the economic freedom of the country is higher than the world average and the Middle east. Fiscal health of the country is improved through some judicial problems of the country creating trouble or weakness in the economy. Rule of law in the country allows business organizations and individuals to purchase ownership and transfer of property. Law of the country is well maintained and leads to corrupt administration help to maintain openness of economy. All these legal positions help to influence the business environment of the country. Business organizations get the courage and confidence to trade with the UAE.
They launched an economic diversification program to reduce their oil species and focus on building a conventional and labour-intensive economy based on knowledge and technology and skill development. The UAE government has started investing in renewable energy, aluminium production, tourism, aviation, export, telecommunication and so on. This investment comes from internally or from the government and externally or from foreign sector. In addition, they started working on the fourth industrial revolution to strengthen the UAE as a Global hub (Uae-embassy.org, 2022). Young leadership of the UAE take this initiative and they play an important role in business, government, science and so on. In addition, they take various courses of action to attract foreign investors in their country such as providing world-class airlines, up-gradation of aviation infrastructure, development of tourism industry, improving infrastructure, implementation of modern technology and development of transportation along with organizing various trade fairs and conventions such as World Expo in Dubai (Uae-embassy.org, 2022).
Openness of the economy can create little opportunity for the country yet it cannot help to develop a country from all sides until the government opens their economy and provides all facilities to investors and business peopleto work in the country. UAE government and administration open their economy and work in every area to attract investment from all over the world and create opportunities for business people to sustain and develop their business. The import and export business of the country increased and improved for all these activities because if a country did not have a manufacturing and service sector it would not be able to be involved in export activity. Most imported and exported products of UAE are precious stones and metals, oil & mineral, electric machinery, industrial machinery, motor vehicle & parts, plastic and so on (Tradingeconomics.com,2022).
Figure 5: Growth of UAE
(Source: Wits.world bank.org)
Figure 6: Trade Balance
(Source: Statitsia.com, 2022)
Total export value of UAE was 389372505.15 thousand USD import value was 28883975444 thousand USD in 2019. In addition, their trade balance was positive with 100974961 thousand USD. total valuation of the export is 92.46% of total GDP of the country whereas tp0tal import was 68.48% of total GDP. These data indicate openness about the economy and it helps to improve the whole economy effectively. Increase import and export contribute large numbers of revenue through tariff and investors easily attract this country for business. Once upon a time their important and export activities highly depend on oil now they import and export several products. Primary reason behind improving trade relations and high-value import and export is economic development, infrastructure development and diversification of the economy from oil to other sectors. Openness of trade and increased exports and imports help to increase the GDP and growth of the country for a long time and it can be identified from figure 5. Import and export will increase soon also. On the other hand, GDP per capita and economic growth are influenced by the trade openness of the country. Government of UAE works in every sector to improve their manufacturing and service sectors and it helps them to open their trade activity and they easily handle strongholds on import and export activity around the world. They are still working on opening their trade activity for various countries by signing tariff contracts, implementing policies. This approach or trade openness approach helps UAE to create a strong image in front of various countries along with a large scale of development.
This report has been discussing one of the fast-moving developing countries of Asia and World UAE. Several important Economic Development key indicators have been evaluated in this report and those imply that the country is developing. On the other hand, the country is open for trade activities and it helps to improve their GDP, Balance of Trade and Economic Growth.
Moiseev, N., Mikhaylov, A., Varyash, I. and Saqib, A., 2020. Investigating the relation of GDP per capita and corruption index. Entrepreneurship and Sustainability Issues, 8(1), p.780.
Musarat, M.A., Alaloul, W.S. and Liew, M.S., 2021. Impact of inflation rate on construction projects budget: A review. Ain Shams Engineering Journal, 12(1), pp.407-414.
Singh, R., 2018. Impact of GDP and inflation on unemployment rate:" A study of Indian Economy in 2011–2018”. International journal of management, IT and Engineering, 8(3), pp.329-340.
Wang, T. and Sun, F., 2021. Spatially explicit global gross domestic product (GDP) data set consistent with the Shared Socioeconomic Pathways. Earth System Science Data Discussions, pp.1-34.
Bbc.co.uk, 2022 Contrasts in development Available at:https://www.bbc.co.uk/bitesize/guides/zs7wrdm/revision/3(Accessed on 19th March, 2022)
Borgenproject.org, 2022 TOP 10 FACTS ABOUT POVERTY IN THE UNITED ARAB EMIRATES Available at:https://borgenproject.org/tag/income-inequality-in-the-united-arab-emirates/(Accessed on 19th March, 2022)
Data.worldbank.org, 2022 Oil rents (% of GDP) - United Arab Emirates Available at:https://data.worldbank.org/indicator/NY.GDP.PETR.RT.ZS?locations=AE(Accessed on 19th March, 2022)
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Heritage.org, 2022 United Arab Emirates Available at:https://www.heritage.org/index/country/unitedarabemirates(Accessed on 19th March, 2022)
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Tradingeconomics.com,2022 Imports in the United Arab Emirates decreased to 774100 AED Million in 2020 from 856900 AED Million in 2019. Available at:https://tradingeconomics.com/united-arab-emirates/imports(Accessed on 19th March, 2022)
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Wto.org, 2022 UAE https://www.wto.org/english/tratop_e/tpr_e/s262_sum_e.pdf(Accessed on 19th March, 2022)