Pest Analysis Of The United Arab Emirates Economics Essay

Pest Analysis Of The linked Arab Emi reckons Economics EssayThe increasing economic develop ment in UAE and Saudi-Arabian-Arabian-Arabian-Arabian-Arabian-Arabian-Arabian Arabia has made these developing states an excellent nation for those king-sized frame who choose to brandish overseas or are affaired in Foreign get Investment (FDI). Globalization support to streng thusly their distribution channel and their economies. Saudi Arabia is cursorily gaining importance as a manufacturer and economic draw in the world. These countries have eliminated many a(prenominal) of their spate barriers now and have a free trade economic system that attracts many business men from around the lump who work throughk new consumers and target market for their products (Bloomberg, 2010). unify ABRAB EMIRATES PEST ANALYSISPOLITICALThe stable political situation of UAE equal to attract almost any major financial institution that ineluctably to invest. These financial institutions can as sist in accessing capital markets emerging at heart the UAE frugality. the banking system developed my emi come outs is a relationship based system of banking with the monetary policy and system capable enough to fulfill funding supplies of a later stage that may be equity leasing or loans (John, 2010). frugalOut of three million existence of UAE 60% of them are in the workforce. In the UAE economic system the level of FDI is very superior. Globalization has helped improve the UAE thriftiness greatly by bringing in thousands of workers, services and products from throughout the world. UAE has been a member of World Bank, WTO and IMF for seven grades. The country has huge wealth and has undergo trade surplus of approximately over 100 billion dirham in the past year (Tomlinson, 2010).SOCIALAll of UAE citizens have high living standard, a western lifestyle and continues uphill financial positions. The club last outs free and open to all types of restaurants, tourism, sport a nd recreational activities. The multicultural nature of society and preservation existing in UAE allows fir many of the foreigners to work there in well paid positions (Cateora and Graham, 2007).TECHNOLOGICALThe UAE population comp revoke of young and extremely technologically knowledgeable professionals. The IT industry aids tourism, hotel and IT service sector. The IT software industries and internet usage in the gulf land is double the outrank of Europe. The UAE population has the largest users of internet, satellite and mobile phone at heart the Middle East (Cateora and Graham, 2007).SAUDI ARABIA PEST ANALYSISPOLITICALThe politically stable presidency 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)ECONOMICSaudi Arab placards for the worlds major oil manufacturing business and merchandiseers. This allows Saudi economy t o earn a high gross domestic product. It also helps its current account to proportionateness against the value of imports when the necessitate for oil is high (Griffin and Pustay, 2009).SOCIALThe religious bill 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 sacred places. This accounts for much of the tax income for Saudi economy. Hotels, restaurants and residential places earn high revenue in these seasons (McGinley, 2010).TECHNOLOGICALSaudi Arab is a country that harbours itself technologically updated as it needs to cater a massive 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 equipt country (Morgan, 2010)MACRO ECONNOMIC ANALYSIS OF BOTH ECONOMIESBALANCE OF TRADEIt refers to the contravention in the VALUE of imports and the VALUE of ex ports when a country trades (Stanlake and Grant, 1995).SAUDI ARABIASaudi Arabian economy describe a trade deficit of or so US$ 32638.2 MILLIONS in the year 2009 in spite of macrocosm the worlds largest producer and exporter of oil with more than 90% of exports being based on it. major(ip) imports of Saudi Arabia include equipment, machinery, food stuff and chemicals with its main trading partners being European Union, China and Japan (Source trading economics.com, indicators, international monetary fund)Analyzing the rationalize we see a stable balanced of trade from the year 2000 to 2006. It then gradually increases process 2009 and falls very rapidly in 2010.we also see rapid rise from the year 2005 to 2006 and from 2008 till 2010 (McGinley, 2010).UNITED ARAB EMIRATESThe exports of innate(p) gas and petroleum play an important role in the UAE export economy. It mainly imports chemical, machinery and equipment from its major trading partners India, Japan, China and European U nion (Menafn, 2009)(Source tradingeconomies.com, Ministry Of Economy) conflicting Saudi Arabia, the BOT of UAE shows a positive up(a)ly rationalise. It initiates steadily from the year 2001 to 2005 and rapidly reaches 211.3 billion 2007. It then falls to 170.85 billion in 2008 which is not in like manner discerning a reducing as it has swiftly gone up in the year 2009-2010.gross domestic product GROWTH RATEIt refers to the gross domesticated 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% last year. The worth of Saudi Arabia GDP is 0.6% of the economic world or 369million dollars(Source tradingeconomies.com, Saudi Arabian primeval Department)The tr contain shown for the GDP rate 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 rate that falls to 0. 6% in the year 2010. This downward movement is not favorable for Saudi Arabia.UNITED ARAB EMIRATES unlike the, Saudi which expanded over the last year, UAE Economy experienced condensing of 2.10% last year. The UAE GPD is worth $ 261 billion and accounts for 0.42% of the total of the world economies.(Source tradingeconomies.com, Ministry Of Economy)The UAE analysis of GDP growth shows a high GDP of about 8% from the graduation exercise of 2001.UAE and Saudi Arabia has a similar inclination till 2004. But UAE shows a 12% rise in GDP rate 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 negative rate of -2.1% (Time out Dubai, 2009) ostentationInflation refers to the general increase in the price levels over the power point of time (Stanlake and Grant, 1995).SAUDI ARABIAThe rising prices rate through the year 2010 was reported at 5.51%. It touched historical heights in 2008 with inflatio n 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 head start 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 preserve 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 variation and steady growth of inflation, UAE economy has faced an upward trend for inflation for the past years.UMEMPLOYEMENTThe un job rate is defined as the number of people of the total bear on force who are unemployed or/and seeking for work (Turnovsky, 1977).SAUDI ARABIAAccording to the last report the un exercising 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 overall economy. We see the percentage of the labor force unemployed locomote 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 farthest 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 Ec onomy)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 high than of Saudi Arabia which has a fluctuating trend for unemployment.INTEREST RATEIt refers to the price of acquire and lending (Hobday, 1988)SAUDI ARABIAThe decisions making authority 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 increasing 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 interest rate trend for the UAE economy and Saudi Arabian economy is very di fferent. 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 aim that the inflationary pressures might stay manageable and stable over the period of 2010-12 (John, 2010). This inflation allow for reflect the cut interest rate .A weakened interest rate lead compel people to spend more. hire for money leave rise as indicated by the monetarist view (Cateora and Graham, 2007). The increase supply of money will eventually increase the price levels as the quantity theory of money explains. There 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 upcoming year 2010-14. Resources reveal that th e Saudi economy is expected to be greatly supported by gigantic spending by the government thus absorbing a large proportion of the job market. A strong increase in enthronement projects by the government is also expected. There will be unspoiled domestic consumption of oil but weaker oil export payable to higher oil prices (Bloomberg, 2010). Due to stronger investment projects from the government the economy will face greater injections into it which will result in falling unemployment rate and rising income levels. This will leave a favorable and positive allude on the Saudi economy in the upcoming years. But sounding 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 weeklong bring any changes in the income and employment levels but prices will begin to rise which will indicate inflation in th e long run (Shihab, 1996).UNITED ARAB EMIRATESThe growth forecast for UAE is displace by the IMF to less than 1% (Tomlinson, 2010). UAE economy is expected to grow 2.9% following(a) year. The investment activity is expected to be weak as the emirate is stressful to redefine its economic objectives (Bloomberg, 2010). As the UAE economy will try to minify its rate of inflation unemployment is expected to rise as defined by the Phillips curve and his short theory of two 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 occupation in the long run and instantly 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 withdrawal and injection approach arouses (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 arouse giving people higher living standards. As for Saudi Arabia sound 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 concentrate on developing trade and other export product that may cover the current account deficit (John, 2010).