Friday, December 6, 2019
Business Economics Economy of UAE
Question: Discuss about the Business Economics for economy of UAE? Answer: Introduction: The article discusses the overall effects on the economy of UAE due to the winning of the recent bid to host the Expo 2020. Since 1851s first Great Fair, the World Expos are continuing to be one of the biggest enduring worldwide mega-events. The world Expos are very much attractive to invite billions of visitors exploring and discovering exhibitions, cultural events that are staged by the participants including different nations. The theme of the World Expo in Dubai is held considering the topic of Connecting Minds, Creating the future. It echoes the partnership spirits and co-operation that drive UAE's success to pioneer new innovative paths for growth and development. In the Expo 2020, the theme induces Dubai to serve as a catalyst that connects minds from all over the world inspiring participants for mobilizing with the challenges taken in the world Expo. The Arabian economy has recovered from the recession gathering momentum in the past couple of years, which was mainly driven by strong growth in travel and tourism, transport, manufacturing industries as the construction sectors have also overcome from the fall in growth. The later sections discuss the analysis of falling oil price and its effects due to this fall in price. Also, the effect of winning in the Expo 2020 is described and discussed. Arabian Economy overview: The economy of UAE is considered as the second largest economy in the Arab world with a high GDP of $570 billion, reported in 2014. The diversifying economy has a huge resource of natural gas and crude oil (Kilian 2016). Therefore, its GDP depends vastly upon the production of oil and revenues gained from them. Especially in Abu Dhabi, the production of petroleum and natural gas plays a very important role in gaining the revenue. In 2009, from the studies, it was noted that almost 85% of the government budget surplus was from the rising oil exports (Nusair 2016). Source: Annual Statistical Bulletin, 2015 The above data are related to overall macroeconomic parameter details of the economy of UAE. According to the data, above 40 per cent of the countrys gross domestic product is yielded from the output of crude oil and natural gas. The discovery of oil has made the economy privileged in terms of GDP in the world market (Al Sabah et al. 2016). Effect of winning in Expo 2020: Expo 2020 is the universally registered exposition time panel designed by the Bureau of International Expositions, Paris, held on November 27, 2013. Dubai in Arabian economy won the right to organize the Expo 2020. Dubai Expo 2020 is going to be a long half-yearly exhibition of trade, innovation from all around the globe in the UAE economy. According to the economists, though the size of Dubai is small, the expo will come with a huge economic impact. The analysis also predicts that the event will make the real estate market increase that is already at an upward rising position. It is expected that Dubai Expo 2020 will attract around 25 millions of visitors, including estimated 70 percent from overseas. The World Expo is expected to be considered as the worlds third biggest global event concerning economic as well as social and cultural impact, in comparison with the FIFA world cup and the Olympic Games. This Expo is going to be the first in which maximum of the visitors stalk and try to go beyond the nations territory. It is expected to run from 20th October 2020 to 10th April 2021, launching the Golden Jubilee celebration of the country (Edizel 2013). This is expected to serve as a new inauguration in progressive as well as sustainable growth prospective in the coming decades. As a global event attracting millions of visitors, a significant amount of dirhams is expected to be added in the country's GDP, though the actual scenario is very much difficult for prediction (Singh 2015.). Analysts predict a generation of around $23 billion for the UAE that equates the GDP of Dubai almost around 24.4 percent between 2015 and 2021. Besides, it is expected to boost the overall growth of the economy of Arab at an average of 6 percent every year from 2014 to 2016. The overall rise in an enormous 10 percent by 2020 is estimated (Khan and Agha 2015). These predictions are done by considering total estimated government expenditure; expenditure by the participants involved i.e. the visitors and commercial activities to promote the event. The UAE government is likely to invest a much substantial amount of money for strengthening the infrastructure hosting the development programs. It is estimated that an amount of around $8.7 billion is expected to be invested in the event, where a specifically huge amount is predicted to be benefitted after Dubai closes its doors in 2021 (Jauncey and Nadkarni 2014). According to some analysts, it is reported that the economy is going to attract around $150 billion of foreign direct investment with a range of industries, in which hospitality, tourism, and real estate are identified (Chambers 2015.). Effect of fall in oil price: During the global recession period, Dubai affected from a very significant economic slow-down and it was rescued by the Abu Dhabis petrodollars. Dubai is in a situation of extreme debt. The falling of oil price caused a massive fall in real GDP of the entire economy of UAE (Narayana and Abraham 2014). The economy also depends vastly upon tourism. Therefore, though it has a decreased its dependence upon natural resources, it still takes into account the production of crude oil and natural gas. The United Arab Emirates is a participant of the World Trade Organization and OPEC. The economy has acquired third ranking in term of GDP, which is gained from oil revenues (Al-Malkawi et al. 2013). As a much-diversified economy, it is very much reliant on oil production and exports. Therefore, the massive recession has caused enormous fall in GDP growth rate. Now, let us consider the data on oil rents affecting GDP of the UAE economy. The percentage of GDP from oil rents is calculated. Oil rents are the difference between the value of crude oil production at world prices and total costs of production. Estimates based on sources and methods described in "The Changing Wealth of Nations: Measuring Sustainable Development in the New Millennium" (World Bank, 2011). Figure: oil rent as percentage share of GDP from 1990-2015 Source: the World Bank Data, 2015 The fall in oil prices reduces the cost of living as the oil-related costs of transports fall directly, with a low inflation rate and low standard of living (Fowowe 2013). This fall in the cost of living induces the people of the economy to be left with more disposable income. Theoretically, a fall in oil price is like a tax cut that leads to greater spending on other consumable products that are added up into the GDP (Mohaddes and Raissi 2016). Thus, there are two macroeconomic impacts for fall in oil prices; one is lower inflation and another one in higher output, which is shown in the diagram below. Figure: shift in short-run supply curve due to lowering oil prices Regarding oil importers, they benefit from the fall in price as oil imports drop with a reduction in current account deficits of the oil importers (Chapman 2014). However, for a country like UAE of which almost 80 percent of the GDP is acquired from oil and natural resources, the fall in oil prices for the protection of oil markets will in turn cause a devaluation in the long-run. This fall in oil prices could affect reversely by an increase in the use of car and purchase of cars (Viscusci et al. 2014). Thus, lower oil prices are entertained by the consumers of UK as it causes a rise in disposable income of the consumers. Conclusion: The article has discussed the position of the economy of UAE that has won the Export 2020. Studies predict that this will come with a very big economic impact on the economy. Dubai Expo 2020 is going to be a long half-yearly exhibition of trade, innovation from all around the globe in the UAE economy (Radwan and Milhem 2015). According to the economists, though the size of Dubai is small, the expo will come with a huge economic impact. 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