Question

Please choose my country United Arab Emirates or Dubai since my professor knows I came from there.

Your job is to propose a macroeconomic policy for a foreign country of interest to you.

TASK #1: Select your country as follows: (1) If you were born in a foreign country, select that country; (2) If you were born in the U.S. but lived in a foreign country, select the foreign country you lived in the most time; (3) If you have never lived in a foreign country, select the foreign country you spent the most time visiting; (4) If you have never left the U.S., select the foreign country that most interests you. State why you selected the country that you selected on your assignment.

TASK #2: Identify and Assess Data. Identify and study recent data and trends in economic growth, unemployment, poverty, and inflation about your country.

Note: An excellent source for current data is the “Guide to Country Comparisons” on the CIA World Fact Book Website at:

https://www.cia.gov/library/publications/the-world-factbook/

TASK #3: Identify at least one recent macroeconomic news or magazine article concerning your country.

PRIMARY TASK: In 1-2 typed pages of your own words, based on the information you collected, 1) characterize the macroeconomic state and direction of your country, 2) Identify what you believe is the major macroeconomic challenge facing your country, and most importantly, 3) recommend a macroeconomic policy (fiscal, monetary, trade, systematic reform, or long-term growth) to the leaders of your country. Explain why your policy might help your country’s economy. Support your proposal with data and/or economic theory.

TASK #5: Appropriately cite your references, and include the online links your sources. At least two sources other than your textbook must be referenced.

Your assignment submission must not exceed 700 words, excluding references.

Answer 1

UAE has transformed from an impoverished region to a modern country with a high standard of living since the discovery of oil in UAE some 60 years ago. There is increased spending on job creation and infrastructure expansion along with investment generation by the government of UAE.

GDP in US Dollars (purchasing power parity):

$671.1 billion (2016 )

$643.1 billion (2015)

$612.8 billion (2014)

GDP - real growth rate:

3% (2016)

3.8% (2015)

3.3% (2014)

GDP - per capita (PPP) in US dollars:

$68,100 (2016)

$68,000 (2015 )

$67,400 (2014 )

The GDP composition by sector of origin shows that Service sector has the major contribution towards GDP growth in UAE which is around 40.1 %. This is due to the fact that UAE has a thriving services sector with some of the world’s most luxurious hotels located here, thriving tourism, rapidly growing manufacturing base and growth in the construction industry. The industry sector has 39.5% contribution to the GDP of UAE with major industries such as petroleum and petrochemicals; fishing, aluminum, cement, fertilizer, commercial ship repair, construction materials, handicrafts and, textiles. Agriculture sector has the least contribution at 0.8% towards the GDP of UAE.

UAE has a labor force of 5.242 million wherein expatriates account for about 85% of the workforce. The majority of workforce i.e. 78% is employed in the services sector, industry sector has 15% of the workforce and agriculture sector has 7% of the workforce. The unemployment rate in UAE stands at 3.6%.

19.5 % of UAE’s population is below the poverty line.

Inflation rate (consumer prices):

1.8% (2016)

4.1% (2015)

The Dubai Chamber Economic Bulletin is a monthly publication that provides updated economic information and analyses on Dubai, UAE, and other economies that are relevant to them. The Bulletin covers markets, sectors, macro-economy, trade and economic events that have impact on Dubai and UAE economies.

Macroeconomic state and direction of the country:

Growth of UAE slowed down in 2016 from 3.8 percent in the previous year to 3 percent. There was a budget deficit of 7.3 percent of GDP in the year 2016 with current account balance falling from $17.25 billion in the year 2015 to $8.412 billion in 2016. Reserves of foreign exchange and gold also declined by about $8 billion in 2016. $218.7 billion was the external debt of UAE in 2016 which increased by $16 billion. The economy continues to experience a slowdown in economic growth as a result of plummeting global oil prices.

Major Challenge:

UAE’s economy is strongly dependent on the oil industry and hence it has faced the brunt of falling oil prices in terms of slowdown in its economic growth. Thus, the major challenge would be to identify and promote those sectors which can thrive regardless of oil market conditions.

Policy recommendation:

Various consolidation measures are needed, including a reduction in electricity and water subsidies and a gradual slowdown in the implementation of GRE’s (Government Related Entities) megaprojects. The main sources of medium-term risk are associated with the financial management of Dubai’s GREs megaprojects. In an environment of low oil prices, macro-financial risks could be exacerbated by declining liquidity in the banking system, increased volatility in the stock markets, and disruptive declines in the real estate sector.