Macroeconomic Analysis of Saudi Arabia and UAE

Macro economic Analysis of Saudi-Arabian-Arabian-Arabian-Arabian-Arabian Arabia and UAEINTRODUCTIONThe change magnitude economic development in UAE and Saudi Arabia has made these developing states an elegant nation for those people who choose to expand all overseas or be interested in Foreign Direct Investment (FDI). globalisation back up to streng wherefore their distri furtherion channel and their economies. Saudi Arabia is speedily gaining importance as a manufacturer and economic leader in the humankind. These countries pee-pee eliminated many a nonher(prenominal) of their trade barriers now and have a free trade economic system that deplumates many business men from around the globe who sepa calculate out out new consumers and target market for their products (Bloomberg, 2010). join ABRAB EMIRATES PEST ANALYSIS(P)OLITICALThe horse barn political situation of UAE tolerable to attract almost any study financial institution that needs to invest. These financial i nstitutions can assist in accessing capital markets emerging indoors the UAE deliverance. the banking system developed my emi tempos is a family relationship based system of banking with the monetary policy and system capable enough to fulfill funding supplies of a later stage that whitethorn be equity leasing or loans (John, 2010).(E)CONOMICOut of three million universe of discourse of UAE 60% of them are in the work posture. In the UAE parsimony the level of FDI is in truth high. Globalization has helped improve the UAE thrift greatly by engageing in thousands of workers, ope appraise and products from throughout the world. UAE has been a member of World Bank, WTO and IMF for seven course of studys. The country has extensive wealth and has experienced trade surplus of approximately over coulomb trillion dirham in the past twelvemonth (Tomlinson, 2010).(S)OCIALAll of UAE citizens have high musical accompaniment standard, a western lifestyle and continues rising financia l positions. The society remains free and open to all types of restaurants, tourism, sport and inexpert activities. The multicultural nature of society and economy subsisting in UAE allows fir many of the foreigners to work there in well paid positions (Cateora and Graham, 2007).(T)ECHNOLOGICALThe UAE population comp fig out of young and extremely technologically knowledgeable professionals. The IT industry support tourism, hotel and IT service sector. The IT software industries and internet usage in the gulf country is double the crop of Europe. The UAE population has the largest users of internet, satellite and mobile phone within the Middle East (Cateora and Graham, 2007).SAUDI ARABIA PEST ANALYSIS(P)OLITICALThe politically unchanging government of Saudi Arab attracts many of the foreign investors and business men. The government in addition provides various incentives that attract many investors and tourism from around the globe (Morgan, 2010)(E)CONOMICSaudi Arab account s for the worlds major oil producer and exporters. This allows Saudi economy to earn a high gross domestic product. It too helps its current account to balance against the value of imports when the pray for oil is high (Griffin and Pustay, 2009).(S)OCIALThe religious history of Saudi Arabia for the Muslim also holds great significance. In the religious seasons people from all over the world come to pay visit to the holy places. This accounts for much of the revenue for Saudi economy. Hotels, restaurants and residential places earn high revenue in these seasons (McGinley, 2010).(T)ECHNOLOGICALSaudi Arab is a country that keeps itself technologically updated as it needs to cater a capacious population of tourists and visitors from around the world. Saudi Arab imports technological machinery from Japan and other countries which enables it to be established as well-technologically equipped country (Morgan, 2010)MACRO ECONNOMIC ANALYSIS OF some(prenominal) ECONOMIESBALANCE OF TRADEIt refers to the dissimilitude in the VALUE of imports and the VALUE of exports when a country trades (Stanlake and Grant, 1995).SAUDI ARABIASaudi Arabian economy reported a trade deficit of about US$ 32638.2 MILLIONS in the year 2009 in spite of existence the worlds largest producer and exporter of oil with more than 90% of exports being based on it. Major imports of Saudi Arabia include equipment, machinery, food barricade and chemicals with its main vocation partners being European Union, china and Japan (Source trading economics.com, indicators, international monetary fund)Analyzing the disregard we see a immutable fit of trade from the year 2000 to 2006. It consequently gradually increases till 2009 and rejoins very rapidly in 2010.we also see rapid elevate from the year 2005 to 2006 and from 2008 till 2010 (McGinley, 2010).UNITED ARAB EMIRATESThe exports of natural gas and petroleum play an meaning(a) role in the UAE export economy. It mainly imports chemical, machin ery and equipment from its major trading partners India, Japan, China and European Union (Menafn, 2009)(Source tradingeconomies.com, Ministry Of Economy)Un similar Saudi Arabia, the BOT of UAE shows a positive upwardly tr demise. It acquires steadily from the year 2001 to 2005 and rapidly reaches 211.3 billion 2007. It then travel to 170.85 billion in 2008 which is not too sharp a decrease as it has swiftly gone up in the year 2009-2010.gross domestic product exploitation RATEIt refers to the gross domestic product that is gained by calculating the difference between the imports and the exports (Hobday, 1988).SAUDI ARABIAThe economy of Saudi Arabia expanded over 0.6% death year. The worth of Saudi Arabia gross domestic product is 0.6% of the economic world or 369million dollars(Source tradingeconomies.com, Saudi Arabian primeval Department)The trend shown for the GDP pass judgment of Saudi Arabia is not stable. We see a sharp rise and a sharp fall from 2001 to 2002 and from 2003 to 2004 reaching up to 7.66% from 2004 we see a fluctuating GDP rove that falls to 0.6% in the year 2010. This downward trend is not affirmatory for Saudi Arabia.UNITED ARAB EMIRATESUnlike the, Saudi which expanded over the dwell year, UAE Economy experienced contraction of 2.10% last year. The UAE GPD is worth $ 261 billion and accounts for 0.42% of the broad(a) of the world economies.(Source tradingeconomies.com, Ministry Of Economy)The UAE analysis of GDP issue shows a high GDP of about 8% from the start of 2001.UAE and Saudi Arabia has a similar trend till 2004. But UAE shows a 12% rise in GDP pass judgment from 2001, unlike Saudi Arabia which shows just 8% from 2001. Saudi Arabia GDP falls to 0.6% by the end of the year 2010 while UAE experienced disallow rove of -2.1% (Time out Dubai, 2009)INFLATIONInflation refers to the general increase in the charge levels over the period of time (Stanlake and Grant, 1995).SAUDI ARABIAThe pompousness rate through the year 201 0 was reported at 5.51%. It touched historical high school in 2008 with inflation of 11.08 %(Source tradingeconomies.com, Saudi Arabian Central Department)The inflation rate of Saudi Arabia shows an upward trend. It is 0.31% in 2001 and continues to rise till 2009. The economy then faces a gradual decrease in the inflation rate and it falls to 3.5% near 2010, from 11.08% same year. By the end of 2010 and the starting of 2011 we see inflation again expected to rise to 5.51% (Tomlinson, 2010).UNITED ARAB EMIRATESThe average inflation rate of UAE is 6.27%. The historical highest inflation recorded for UAE had been 11.10 %(Source tradingeconomics.com, Ministry of Economy)The inflation rate of UAE has grown steadily over the years. The trend shows no downward trend but it continues to grow from 2003 till 2008. Unlike Saudi Arabia high shows fluctuation and steady growth of inflation, UAE economy has faced an upward trend for inflation for the past years.UMEMPLOYEMENTThe unemployment rat e is defined as the number of people of the total labor force who are unemployed or/and seeking for work (Turnovsky, 1977).SAUDI ARABIA concord to the last report the unemployment rate in Saudi Arabia was 10.5% in Saudi Arabia. From 1999 till 2009 Saudi Arabias unemployment rate reached to the average of 10.5%. The historical height of Saudi Arabias unemployment rate was recorded at 12%.(Source tradingeconomies.com, Saudi Arabian Central Department)The unemployment rate illustrated above shows an upward trend of rising unemployment in the Saudi economy which is definitely not a favorable indicator for the boilers suit economy. We see the percentage of the labor force unemployed falling from the year 2007 to 2009 sharply but it fails to keep it lower and rises again to 10.5% by the end of 2010.UNITED ARAB EMIRATESThe unemployment rate of UAE far exceeds of that of Saudi Arabia. It was calculated as 20.60 in 2004 which was the historical height achieved for the UAE economy according to arabian news (Tomlinson, 2010)(Source tradingeconomics.com, Ministry of Economy)For UAE economy the unemployment rate shows an upward trend but not as rapidly and sharp as for the Saudi Arabia. But the total percentage of the rate of unemployment in UAE is higher than of Saudi Arabia which has a fluctuating trend for unemployment. avocation RATEIt refers to the price of borrowing and lending (Hobday, 1988)SAUDI ARABIAThe lasts making part regarding the interest rates lies with the Saudi Arabian Monetary Agency (SAMA) (Cateora and Graham, 2007).(Source tradingeconomies.com, Saudi Arabian Central Department)The interest rate trend shown above illustrates a downward initial trend and then a slight increase graph followed by a sharper fall with a stable and constant rate from 2009 till 2010.UNITED ARAB EMIRATESThe UAE interest rate decision making authority lies with the Central Bank of the United Arab Emirates (Ahmed, 2004)(Source tradingeconomics.com, Ministry of Economy)The inte rest rate trend for the UAE economy and Saudi Arabian economy is very different. Un like Saudi Arabia UAE faces many fluctuation through the years from 20007 till 2009.it starts at a higher rate, remain stable, falls and then rises quite sharply. It then experiences little fluctuations and rests at 1.80 with the starting of 2011.SUGGESTIONS FOR IMPROVEMENTSAUDI ARAB ECONOMYThe over analysis of past trends suggest that the inflationary pressures might stay doable and stable over the period of 2010-12 (John, 2010). This inflation exit reflect the cut interest rate .A weakened interest rate will compel people to spend more. Demand for money will rise as indicated by the monetarist enamour (Cateora and Graham, 2007). The increased supply of money will lastly increase the price levels as the quantity theory of money explains. on that point may be a fear of inflation which may exist then. Population growth will be generating some local price pressures. The economy is expected to grow by an average 3.7% in the forthcoming year 2010-14. Resources reveal that the Saudi economy is expected to be greatly supported by extensive spending by the government frankincense absorbing a large proportion of the job market. A tough increase in enthronement projects by the government is also expected. in that location will be good domestic consumption of oil but weaker oil export due to higher oil prices (Bloomberg, 2010). Due to stronger investment projects from the government the economy will face greater injections into it which will bequeath in falling unemployment rate and rising income levels. This will leave a favorable and positive impact on the Saudi economy in the upcoming years. But looking at the Saudi economy from the Keynes view/Classical theory of income and employment we see as the employment and income levels will rise due to injections in the economy, there will come a certain level, that aggregate demand will no longer bring any changes in the income and employment levels but prices will begin to rise which will indicate inflation in the long run (Shihab, 1996).UNITED ARAB EMIRATESThe growth forecast for UAE is lowered by the IMF to less than 1% (Tomlinson, 2010). UAE economy is expected to grow 2.9% following year. The investment activity is expected to be weak as the emirate is trying to redefine its economic objectives (Bloomberg, 2010). As the UAE economy will try to reduce its rate of inflation unemployment is expected to rise as defined by the Phillips curve and his short theory of both devils that exist in the society. For the longer run, the monetarist view can also be taken into account when we will see UAE economy will try to reduce its rate of unemployment. The offered higher wages will ultimately be raising the cost of production in the long run and forthwith growing inflation continuing the trend the economy showed for the pat years. This will result in falling income levels and higher rate of unemployment as the se paration and injection approach suggests (Menafn, 2009).Experts suggest that the above economies should try to reduce their rate if inflation especially in case of UAE. This may reduce the unemployment level and the levels of income will eventually raise giving people higher living standards. As for Saudi Arabia expert suggests the government to precede with its investment projects and attract other investors from throughout the world. As the current account of Saudi Arabia has been greatly affected by the rising oil prices, Saudi government should compress on developing trade and other export product that may cover the current account deficit (John, 2010).