Instructions and Rubrics for Your Term Paper (180 Points or 20% of your final grade) Notes: 1. Your term paper is due on Wednesday July 20, 2022 by 11.59 p.m. Late submissions are not accepted. No exceptions! 2. You should first write a rough draft, in the format below. Then polish your thoughts, ideas, and their expression until you are satisfied you have done the best job you can. Write your final draft, and turn it in. 3. Your paper should follow the outline presented here. You can deviate from it, but if you do so substantially, you should have an extremely good reason. 4. Your paper should have a “References Cited” section rather than a “Bibliography.” It should include all the sources you used for your paper, and no sources that you did not use. Sources you found that were ultimately unhelpful are not included in the “References Cited.” 5. For style of citations, it is up to you. 6. You must show that you have done some serious research, and your term paper must meet the assignment’s length requirement. 7. Your term paper needs to be typed and double-spaced on standard-sized paper (8.5 X 11 inches). 8. For useful sources, please visit tradingeconomics.com., World Bank, IMF, UN, Federal Reserve Bank of St. Louis, etc. 9. When you are done, please log in to your Blackboard account. Then, click on “Assignments” and “Term Paper”, respectively in order to upload your pdf file and submit it to me. 1 Format & Rubrics: - Title page (1 page: 5 Points) -- For example, “The Economy of Japan” by … - Table of contents (1 page: 5 Points) - Introduction (2-4 pages: 15 Points) -- The main objective of this paper is to study economic performance of ... -- Economic system and economic indicators before 2001 - General information and interesting facts, including pictures (2-4 pages: 15 Points) - Flag - Capital city - Weather - Food - Tourist attractions - History - etc…. - 10 Macroeconomic Indicators (Monthly, quarterly or yearly data) - Nominal GDP or Real GDP (1-2 pages: 10 Points) --- Graph (To earn full credit you must include data from 2001 to present.) --- Definition --- Discussion - Growth Rate of Nominal GDP or Growth Rate of Real GDP (1-2 pages: 10 Points) --- Graph (To earn full credit you must include data from 2001 to present.) --- Definition --- Discussion - Nominal GDP per capita or Real GDP per capita (1-2 pages: 10 Points) --- Graph (To earn full credit you must include data from 2001 to present.) --- Definition --- Discussion - Growth rate of Nominal GDP per capita or Growth Rate of Real GDP per capita (1-2 pages: 10 Points) --- Graph (To earn full credit you must include data from 2001 to present.) --- Definition --- Discussion 2 - CPI or GDP deflator (1-2 pages: 10 Points) --- Graph (To earn full credit you must include data from 2001 to present.) --- Definition --- Discussion - U-rate (1-2 pages: 10 Points) --- Graph (To earn full credit you must include data from 2001 to present.) --- Definition --- Discussion - Inflation rate (1-2 pages: 10 Points) --- Graph (To earn full credit you must include data from 2001 to present.) --- Definition --- Discussion - Misery Index (1-2 pages: 10 points) --- Graph (To earn full credit you must include data from 2001 to present.) --- Definition --- Discussion - Trade balance (1-2 pages: 10 Points) --- Graph (To earn full credit you must include data from 2001 to present.) --- Definition --- Discussion - Government budget balance or government budget balance as a percentage of GDP (1-2 pages: 10 points) --- Graph (To earn full credit you must include data from 2001 to present.) --- Definition --- Discussion - Conclusion (2-4 pages: 30 points) -- Is the economy in good shape or bad shape? Why or Why not? -- After observing all indicators, what do you see/think? -- Any suggestions? - References (1-2 pages: 10 Points) - Appendix (optional) _________________ 3 Rychener 1 The Economy of the UAE By: Ryland Rychener Rychener 2 Table of Contents Page 1: Title Page Page 2: Table of Contents Pages 3: Introduction Pages 6: Background on the UAE Page 8: Real GDP Page 10: Growth Rate of Real GDP Page 12: Real GDP Per Capita Page 14: Growth Rate of Real GDP Per Capita Page 16: GDP Deflator Page 18: U-Rate Page 20: Inflation Rate Page 22: Misery Index Page 24: Trade Balance Page 26: Government Budget Balance as a Percentage of GDP Pages 28: Conclusion Pages 31: References Rychener 3 Introduction The main objective of this paper is to study the economic performance of the United Arab Emirates (UAE). The economic evaluation will consist of analyses of a multitude of economic indices. Each statistic and indicator detailed is subsidiary to the overall well-being of an economy but plays an instrumental role in giving the reader a comprehensive sagaciousness of the performance of the economy. The UAE is a small country located on the Southeast Arabian Peninsula in the Middle East. The UAE gets its name from the seven Emirates it is composed of: Abu Dhabi, Dubai, Sharjah, Ras Al Khaimah, Ajman, Umm Al Quwain, and Fujairah. The area that is now the UAE was widely unheard of until the 18th Century when the Al Qasimi family, who claimed to be direct descendants of the Prophet Muhammad, utilized their powerful navy to gain maritime control of the Persian Gulf. This control led to a conflict with Oman, a neighboring country and an ally of England, and the British-sponsored East India Tea Company, causing the British navy to get involved. After a lengthy British maritime campaign, several treaties were drafted and signed including the General Maritime Treaty of 1820 and the 1853 Perpetual Maritime Peace Treaty, aimed at creating maritime peace and the development of the Emirates into the British protectorate named the “Trucial States”. In the late 1950s, oil was discovered in the Trucial States and thus began a period of rapid growth and development. New infrastructure was built, workers brought in to extract the newfound oil, companies seeking to profit, and boundaries were drawn between the 7 Emirates to ensure the security of the new oil companies. In 1971, Britain officially relinquished their influence in the Persian Gulf by pulling out of the Trucial States. This was the last territory in the Rychener 4 Persian Gulf that they still exercised authority over. The UAE was officially formed on December 2, 1971. However, it was not until early 1972 that all 7 Emirates agreed to join the federation. With this newfound sovereignty, the UAE joined the Arab League and the United Nations following their independence in late 1971. Oil and natural resources continue to dominate the economic output of the UAE to this day. Foreign workers and companies are also drawn to this economic haven wooed by the nonexistent corporate and personal tax rates (the UAE just announced a 9% corporate tax that will be introduced in 2023), with foreigners making up just under 9 million of the approximate 10 million residents of the UAE. The UAE is home to two of the most well-known cities in the Middle East: Abu Dhabi and Dubai. With warm weather and each city oozing with innovation and grand attractions, they are two of the largest tourist destinations in the area. Tourism is another large part of its economy with structures such as the Burj Khalifa, the Dubai Mall, Ferrari World, the Dubai Aquarium, the Palm Jumeirah, and the Sheikh Zayed Grand Mosque to name a few. In this paper, I will be comparing the economy of the UAE to that of the United States. Though the UAE only commands approximately 35,000 square miles (about the area of South Carolina) compared to the approximately 3,700,000 of the United States respectively, by using metrics like per capita to measure economic activity, it scales the countries down to a directly comparable level. Beyond measuring size by square miles, though, the population of the UAE is ~10 million compared to ~330 million in the United States. These size differences influence the amount and scale of business opportunities each country can offer, making each economy unique and difficult to compare to another. However, for simplicity, I will be comparing these countries’ Rychener 5 economic indicators to give the reader a more applicable understanding of the state of the economy in these countries. Rychener 6 General Information I chose to research the economy of the United Arab Emirates because I will be living and working in Dubai this upcoming summer and wanted to get a better understanding of the economy before I arrived. I will be working for Move One, a multinational supply chain and logistics company headquartered in Dubai, where I will be recording and organizing invoices for their operational arm located on the Arabian Peninsula. I also have a fascination with economies and business in the Middle East as I am currently studying Arabic and was fortunate enough to receive a competitive critical language scholarship in high school to spend a summer in Rabat, Morocco studying the local dialect of Arabic. The UAE has a hot desert climate with little precipitation. The average high in Dubai in July and August is 107 degrees Fahrenheit with high humidity. The high during the winter usually gets around a milder 75-80 degrees. Surprisingly, in the mountainous city of Ras Al Khaimah, snow was recorded during the peak of winter as temperatures eclipsed 23 degrees Fahrenheit in 2009, dropping off 4 inches of snow. The capital of the UAE is Abu Dhabi, and the government is structured as an elective monarchy. Each Emirate has a governing “Emir,” which meet together to form the top policy-making body in the Federal Supreme Council. This council elects a President of the Federation and a Vice President, which hold their offices for 5-year terms. The President appoints a Prime Minister who then selects a cabinet to help him oversee the implementation of government policies. All Rychener 7 the legislation passed through the Federal Supreme Council is reviewed by the 40-member parliament named the Federal National Council. This complex system of checks and balances ensures that no one person will gain too much power. The flag of the UAE is red, white, green, and black. Each color is symbolic and represents a core value of the United Arab Emirates. Red symbolizes unity, bravery, and courage. Green represents optimism, love, and affluence. White represents peace, honesty, and cleanliness. Black represents the defeat of enemies and strength of mind. Some fun facts about the UAE are that it is home to the Burj Khalifa, which is the world’s tallest building, the Palm Jumeriah in Dubai, which is the world’s largest manmade island and sits directly adjacent to a slew of artificial islands shaped in the form of a world map, and Terminal 3 in Dubai’s airport, which is the world’s largest airport terminal featuring a 5-star hotel. It is also home to the world’s deepest swimming pool, the world’s fastest roller coaster at Ferrari World in Abu Dhabi, the world’s most inclined building (14 degrees more tilted than the Leaning Tower of Piza), the largest mall in the world (including an indoor ski slope), the world’s first seven-star hotel, the largest suspended aquarium in the world, and a man-made 217-hectare safari preservation with imported African animals just to name a few attractions. With all these places of interest, it is no wonder that a sizeable portion of the UAE’s GDP comes from tourism. Rychener 8 Real GDP Above is a graph of the real GDP of the United Arab Emirates from 1980 until the present day with a projection through 2025 measured in billions of USD. In 2022, the UAE is expected to have a GDP of 427.93 billion USD. GDP, also known as gross domestic product, is the final monetary value of all goods and services produced within the boundaries of the UAE during any specific period (typically measured in years). GDP is a wide overview of the productivity of an economy and measures how much money is circulating during a specified period. Mathematically, if we use the expenditure approach, we can define GDP as Y = C + I + G + (X – I) where GDP is denoted as Y, C is consumption on spending, I is investment spending, G is government spending, and X – I is net exports (exports minus imports). While typically I would break down the GDP of the UAE by sector, the preceding years of 2020 and 2021 have skewed data values due to the Covid shutdowns limiting the amount of global travel and tourism revenue flowing through the economy. According to the graph, the UAE’s GDP has been steadily growing with a few recessionary periods in 2008, 2014, and 2020. The sharp decrease in 2020 on the graph is representative of the Covid pandemic limiting global Rychener 9 travel and economic output, in turn decreasing the GDP of the UAE. The 2008 recession was due to the subprime mortgage lending crisis in the United States, which decreased GDP in many countries closely affiliated with the United States or invested in United States markets. The 2014 recession was due to the Gulf Corporation Council (GCC) crisis, which occurred due to the effects of the Arab Spring’s shockwave of revolution throughout many Arab nations with several established governments being overthrown. However, without these brief recessionary periods, the GDP would follow a continuous exponential growth pattern projected to continue through 2025. Considering all periods of GDP decline have been caused by outside influences and the UAE continues to increase productivity and adjust for inflation, the GDP aspect of their economy looks very promising for the future. Any country that can sustain continued growth and economic output with consistency will become a leading economy with time. Rychener 10 Growth Rate of Real GDP The graph above shows the growth rate of the real GDP of the UAE (light green) and the United States (red) from 1980 until the present day with a projection until 2025. The real GDP growth rate is an important economic indicator for economists to gauge the health of an economy. It is calculated by subtracting the GDP of a certain year by the preceding year, dividing that value by the GDP of the earlier year, and multiplying the product by 100. This metric is expressed as a percentage and is used to show how much an economy has changed its output over a specified period. The real GDP growth rate is a better measure of economic growth than the nominal GDP growth rate since real GDP is adjusted for inflation, excluding the inflation rate from the measured growth of the economy. Overall, both countries follow a similar growth pattern. However, an outlier to these resemblances is the large fluctuations in the GDP growth of the UAE in the late 1980s. These drastic changes in GDP growth were caused by several armed conflicts in the region during this period and the discovery of large oil fields in the Abu Dhabi Emirate. Following the capricious GDP growth activity of the late 1980s, the UAE’s growth rate seemed to oscillate between ~2% Rychener 11 and 10% until the 2008 mortgage crisis. It has since adopted a steadier growth rate that follows that of the United States more closely. Comparatively, the United States has a much steadier growth rate over the period shown than the UAE. This is because the United States has a more established economy and relies on a variety of economic output sources than the oil and miningdominated economy of the UAE. Over time, the UAE will have to evolve into a multidimensional economy if it wants to continue its sustained growth. Rychener 12 Real GDP Per Capita The preceding graph shows the real GDP per capita of the UAE (green) and the United States (red) measured in USD. Real GDP per capita is synonymous with the standard of living for a country and is a measure of how wealthy individual citizens are in each country. It is calculated by dividing the real GDP of a country by the population for a particular year. The graph of the GDP per capita of the UAE starts out just under $40,000 and quickly falls to $20,000 in the span of about 5 years. It then paces that of the United States until 2008 when it falls below the GDP per capita of the United States and has yet to recover to that level. On the other hand, the United States has experienced consistent and predictable growth with the only minor exception being the slight dip due to the Covid-19 pandemic in 2020. The reason for the great fluctuations in the GDP per capita of the UAE is the rapid development of the area as shown by the previous sections, but more importantly, the population boom that the UAE has experienced since the 1980s. Rychener 13 Since the 1980s the population of the UAE has increased 10-fold, having a drastic impact on the GDP per capita. This is also the reason for the decrease in the UAE’s GDP per capita between 1980 and 1985. Before 1980, there was minimal development, and the economy was dominated by oil and mining, concentrating the wealth generated by these industries on the limited population of the time. However, once the population began to grow, oil and mining production was not able to increase output proportionally, decreasing GDP per capita in effect. Even today, if the UAE wants to facilitate consistent growth, it must focus on industries with more sustainable cash flows. Rychener 14 Growth Rate of Real GDP Per Capita This graph shows the growth rate of the real GDP per capita of the United Arab Emirates (blue) and the United States (green). This graph is simply the derivative of the GDP per capita graph discussed in the previous section. The growth rate of the real GDP per capita is a measure of how the standard of living (real GDP per capita) changes from year to year. While the United States has experienced a relatively consistent growth rate of around 2-3%, UAE had tremendous fluctuations in the growth rate of their GDP per capita until 1990. This stems from the factors discussed in the previous section including changes in population, wars in neighboring countries, and the discovery of new oil fields in the Abu Dhabi Emirate. They also experienced a large negative change in their standard of living from 2002 to about 2009, which is due to the massive population growth that they experienced during this period, diluting the GDP Rychener 15 among its citizens. This population shift is modeled below in the population graph of the UAE between 1980 and 2021. The population graph follows a logistical curve growth with the growth slowing around 2010. This can also be seen in the growth rate of the real GDP graph for the UAE in 2010 when the growth rate rebounded from a rate of ~-15% to a rate of ~3% in just one year. While there were other minor factors involved in this shift including the mortgage lending crisis in the US that exacerbated the negative effect of the population growth on real GDP per capita growth, the slowing of population growth is a significant cause for it. Rychener 16 GDP Deflator The preceding graph shows the GDP deflator for the UAE (green) and the United States (blue). Mathematically, the GDP deflator is found by dividing the nominal GDP of a certain year by the real GDP of that year, which excludes inflation, multiplied by 100. This index can then be used to compare it to a base year, which will always be 100, to show how much prices in an economy have changed from one year to another. This is similar to CPI; however, CPI focuses on the changes in the price of a pre-specified basket of consumer-oriented goods, whereas the GDP deflator accounts for changes in prices of all goods, including imports. Put simply, the GDP deflator is an economy-wide measure of prices and CPI is a measure of the change in prices of consumer goods. Rychener 17 The United States has experienced extremely consistent growth in economy-wide prices since 1980 following a steady linear growth pattern as shown in the graph. The UAE’s changes in prices have been a little more erratic than that of the United States. From the graph, we can see that the base year for each country’s GDP deflator is 2014 since both countries intersect the base price level of 100 during this year. Shortly before this base year, the UAE had a GDP deflator value of ~115 in 2012 indicating that prices were 15 percentage points higher than those in 2014. In 1980, the GDP deflator for the United States was around 40 with the UAE just under this value. Using these values, we can show that prices have risen 2.5 times what they were in 1980 for the United States and have risen even more for the UAE. Using calculus, we can prove that the derivative of this graph is the inflation rate. This indicates that the United States has experienced very consistent inflation since the 1980s and the UAE has had extreme periods of inflation and deflation, namely from 1997 until the present day. Rychener 18 Unemployment Rate Above is the unemployment rate of the UAE (top) and the United States (bottom) from 1991 until the present day. Unfortunately, the World Bank whose graphs have been featured throughout my paper had incomplete information regarding the unemployment rate of the UAE, and I was only able to find consistent data dating back to 1991. The unemployment rate is the number of people in the labor force who are currently unemployed (adults 16 or older that have looked for work in the past four weeks) divided by the total labor force. It can also be calculated by adding the rate of the 3 components of unemployment together: cyclical unemployment rate, structural unemployment rate, and frictional unemployment rate. Rychener 19 The cyclical unemployment rate is the percentage of the labor force that is currently out of work due to the ups and downs in GDP: if the rate is above 0, the economy is in contraction, if it is equal to 0, it is at full employment; if it is below 0, the economy is expanding. The structural unemployment rate is a more severe form of unemployment caused by fundamental shifts in an economy (e.g., minimum wage increases, outsourcing work to technology, etc.). Frictional unemployment is the time someone spends between leaving a job and finding a job that best fits their skills and experiences. The UAE has had a comparatively low and consistent unemployment rate compared to that of the United States. The spikes in the unemployment rate in the United States are due to the recession caused by the burst of the dot com bubble in 2001, the subprime mortgage lending crisis in 2008, and the Covid-19 pandemic in 2020. However, the UAE having a low unemployment rate makes sense from a demographic standpoint. Over 70% of the population in the UAE is male with many of these males being working-age immigrants who populate large cities such as Abu Dhabi and Dubai. With so much of the population being working immigrants, it is not hard to see why the unemployment rate is so low in the UAE. Rychener 20 Inflation Rate This graph shows the inflation rate of the UAE (green) and the United States (blue) from 1980 until the present day. As mentioned previously, the inflation rate is simply the derivative of the GDP deflator graph. To solve for the inflation rate between two years algebraically, we can take the GDP deflator values of the more recent year and subtract the first year from this value. Then, divide the difference by the value of the first year. Multiply by 100 and this will yield the inflation rate in percentage between these years. As for many of the graphs, the UAE has substantially more volatility than the United States. However, this is to be expected as the GDP deflator graph was more volatile as well. Typically, a good indicator of a strong economy is a country that has sustained low inflation over a prolonged period. The United States fits this standard well as following the early 1980s they have not experienced a rate of inflation over 5%. In more recent graphs, this may not be the case as the Rychener 21 Covid 19 pandemic has caused inflation rates to rise due to the copious amounts of money being pumped into the economy by the government to compensate for lower levels of economic output through stimulus checks, HERF grants, unemployment benefits, etc. The UAE on the other hand has had large periods of economic inflation as well as deflation, which is not good from an economic standpoint. The country’s central bank is supposed to use monetary policies such as raising bond yields, increasing interest rates, and controlling the money supply to limit the fluctuations in inflation rates over time. The fact that the UAE has large volatility in its inflation rates shows that its central bank is ineffective in using monetary policy to control inflation rates, which negatively reflects on the economy. Rychener 22 Misery Index Above is an excel-generated graph of the misery index of the United States (blue) and the UAE (green) from 2001 (1) until 2020 (20). The misery index is calculated by adding the unemployment rate (U-3) and the inflation rate. As the name implies, the misery index is a measure of economic suffering in a country with a higher value indicating more suffering. Countries with low values tend to have less inflation and lower unemployment, which is a sign of a strong economy. The UAE is an interesting case of the misery index due to its inherently low unemployment rate (discussed in the unemployment section) and its wide fluctuations in the inflation rate. In some years, the UAE experiences deflation (when the inflation rate is less than zero) that is greater than its rate of employment, which creates negative misery index values less than –13%. This is rare for established economies as it is uncommon to see a negative inflation rate, and certainly a Rychener 23 deflation rate great enough to make the misery index negative. For example, the United States never dips below a 5% misery index as it has a cyclical unemployment cycle but a stable inflation rate. While low misery index values are sought after, the drastic changes in the UAE’s misery index speak larger volumes about the state of the economy than the misery index itself. Since the UAE has a naturally low unemployment rate, the central bank must control the inflation rate with greater consistency if it wants to have a stable misery index. Rychener 24 Trade Balance This graph shows the trade surplus of the UAE measured in millions of AED (1 USD ~ 0.27 AED) from 2000 until 2020. The trade balance of an economy is measured by exports minus imports. It is represented in the GDP formula as NX or (X-I), which is also referred to as “Net Capital Inflow” or NCI. Therefore, if a country imports a higher value of foreign goods than it exports, it will have a trade deficit and a negative NCI. Conversely, if a country exports more than it imports, it will have a trade surplus and a positive NCI. While the United States has almost always run a trade deficit, the UAE has adopted the opposite policy by strictly running a trade surplus since 2000. However, due to the abundance of natural resources possessed by the UAE, it is no surprise that they run a trade surplus considering their oil, mining, and natural gas industries far outweigh their domestic demand. Over the past 20 years, the UAE has averaged a mean trade surplus of 228.9 billion AED or approximately 62.3 billion USD. This is very promising for the UAE as these exports inject their economy with foreign money, in turn boosting many economic indices including GDP and GDP per capita. Rychener 25 The trade surplus the UAE has is beneficial to its economy. This economic situation speaks about the UAE’s self-dependence and trade relations with other countries. However, the main exports of the UAE are non-renewable energy sources, which have a finite lifespan and will cause the UAE to have a major shift in the goods they export and on their economic basis as these oil reserves are estimated to be used in the next 30-50 years. The UAE needs to start developing new sources of economic inflow so that it will be in a much better position when the money from oil and natural gas runs dry. Rychener 26 Government Budget Balance as a Percentage of GDP Depicted above is the government’s budget as a percentage of total GDP for the UAE (top) and the United States (bottom) from 2000 until the present day. If a government spends less than it receives in taxes, then it will run a budget surplus (blue bars); on the contrary, if a government Rychener 27 spends more than it receives, it will run a budget deficit (yellow bars). The value of the surplus or deficit divided by the GDP of the entire economy gives us the values shown in the graph. These percentages are a good measure of how well a government manages the money that it spends and receives. On average, the UAE runs close to a balanced budget with certain years having surpluses and others having deficits. On the other hand, the United States has almost exclusively been in a budget deficit since 2000. While the United States is an accredited economy and can find the debt financing to continually run a deficit, it will still have to repay its debts at some point. While the UAE is still a well-established economy, it has less overall income to be able to take on substantial amounts of debt like the United States. Overall, a good sign of sustainable economic strength is a consistently balanced budget, which is something the UAE does well. By doing so, it has less principle to pay down over time and less interest accumulating while it pays down its debt. Something interesting about this graph is the government spending around times of economic hardship and recession. Both the UAE and the United States drastically increase government spending in times of economic downturn. This stimulates the economy, increases aggregate demand, and increases interest rates to encourage more investment. Rychener 28 Conclusion This paper is aimed at presenting the audience with a holistic view of the economy of the UAE by studying a variety of economic indicators. Each indicator gives added information about the economy from real GDP per capita to the UAE’s trade balance. Now that the analysis is complete, we can make inferences and suggestions for the economy based on the data and graphs discussed in the paper. Considering that the UAE is approximately the size of South Carolina, one would not think it would be a keystone piece of the global economy. However, due to its abundance of natural resources and its multitude of international attractions, the UAE has managed to become a large exporter of oil and natural gas while becoming the fifth largest economy in the Middle East. The UAE has very few native citizens with foreign workers dominating the population with a ratio of almost 9 to 1. Many of these workers are male as working-aged men are the dominant demographic in the country. In effect, this helps to keep the unemployment rate at a low, stable rate compared to other countries. According to the CIA, the UAE has the 34th largest GDP in the world. For a country of its size, this metric is very impressive. The main source of its income is exporting oil, natural gas, and other natural resources to countries around the globe. In turn, this also helps the UAE to maintain a trade surplus, which is a good measure of economic independence. However, the UAE must be careful not to fully rely on these nonrenewable resources as they will dissipate over time, leaving the economy without a substantial part of its GDP if not fully planned for. The most worrisome out of all the statistics, though, is the GDP deflator and the inflation rate. While these statistics follow the same general upward trend that the United States does, the Rychener 29 economy of the UAE experiences much more volatility over the same period. In most recent years, the UAE has seen inflation change by over 15% in one year with inflation changing by over 30% in one year following the 2008 recession. This speaks volumes, not only about the economy but also about the central bank’s ability to control inflation with monetary policy or through other means. Looking at the graph of the United States, the inflation rate and GDP deflator increase over time, but experience far less change from year-to-year than the UAE does. This is a good sign of a strong central bank being able to control inflation and the money supply in times of prosperity, but more importantly, in times of recession and economic tribulations. Without a bank successfully controlling inflation rates, the economy will be much less stable during times of economic hardship. GDP per capita and the growth rate of GDP per capita are also interesting cases. Despite the GDP growing at a consistent rate, the GDP per capita has remained relatively flat in recent years. The growth rate of GDP per capita has also experienced a lot of volatility over time. This behavior does not make sense until you look at the population graph during the same period. Between 2005 and 2010, the population of the UAE more than doubled due to an influx of international workers. While GDP may have increased over this period, the number of new workers outpaced the economic growth, causing large fluctuations in GDP per capita and the growth rate of GDP per capita. While it is typically not a good indicator if GDP per capita decreases, the cause of the decrease in recent years is justifiable and does not reflect poorly on the economy of the UAE. Overall, the economy of the UAE needs some improvement but is on the right track. The government does a good job maintaining a balanced budget, a trade surplus, and a low unemployment rate. However, without a strong centralized bank, the economy is subject to large Rychener 30 amounts of volatility and changes in price levels. The main component of the UAE’s GDP is its exports of nonrenewable natural resources, which are not a sustainable form of income in the long term. While the UAE has spent billions of dollars in recent years to become a global tourism hub, the Covid pandemic has severely limited international travel and has drained this industry of cash flows. Hopefully, in the coming years, the UAE will see an increase in the percentage of its GDP consumed by tourism as travel picks up in the tailwind of the pandemic. As the world oil supply is limited due to the Russia-Ukraine conflict and as global travel increases, the UAE is in a good position to grow its GDP and solidify itself as a lead economy in the Middle East in the coming years. Rychener 31 References “Dubai Skyline.” Dronestagram, 20 June 2017, www.dronestagr.am/dubai-skyline/. Accessed 31 Mar. 2022. Global Media Insight. “UAE Population Statistics in 2019 (Infographics) | GMI.” Official GMI Blog, 30 Jan. 2019, www.globalmediainsight.com/blog/uae-population-statistics/. “History of the UAE - the Official Portal of the UAE Government.” U.ae, 9 June 2020, u.ae/en/more/history-of-the-uae. “Https://Www.imf.org/External/Datamapper/NGDPD@WEO/ARE?Zoom=ARE&Highlight=A RE.” Www.imf.org, www.imf.org/external/datamapper/NGDPD@WEO/ARE?zoom=ARE&highlight=ARE. Accessed 31 Mar. 2022. “It’s Snowing Heavily in UAE for the First Time in Almost a Decade.” The Independent, 6 Feb. 2017, www.independent.co.uk/news/world/middle-east/uae-snowfall-arctic-windstemperatures-sub-zero-dubai-abu-dhabi-united-arab-emirates-a7564591.html. Accessed 31 Mar. 2022. “Real GDP (Purchasing Power Parity) - the World Factbook.” Www.cia.gov, www.cia.gov/theworld-factbook/field/real-gdp-purchasing-power-parity/country-comparison. “The UAE Government.” Mofaic.gov.ae, 2019, www.mofaic.gov.ae/en/the-UAE/TheGovernment. “United Arab Emirates Balance of Trade | 2000-2019 Data | 2020-2022 Forecast.” Tradingeconomics.com, tradingeconomics.com/united-arab-emirates/balance-of-trade. “United Arab Emirates Flag Image and Meaning | United Arab Emirates Flag Updated 2022.” Flagsworld.org, flagsworld.org/united-arab-emirates-flag.html Accessed 31 Mar. 2022. Worldometers. “GDP by Country - Worldometers.” Worldometers.info, 2017, www.worldometers.info/gdp/gdp-by-country/. - Misery Index (1-2 pages: 10 points) --- Graph (To earn full credit you must include data from 2001 to present.) --- Definition --- Discussion - Trade balance (1-2 pages: 10 Points) --- Graph (To earn full credit you must include data from 2001 to present.) --- Definition --- Discussion - Government budget balance or government budget balance as a percentage of GDP (1-2 pages: 10 points) --- Graph (To earn full credit you must include data from 2001 to present.) --- Definition - Discussion
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