The Financial Crisis of the United Arab Emirates
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The Financial Crisis of the United Arab Emirates   The United Arab Emirates is located on the southeast end of the Arabian Peninsula on the Persian Gulf, sharing borders with Oman, and Saudi Arabia, as well as sharing sea borders with Qatar and Iran. The UAE also has a population of 9.2million (2013, most recent). The UAE has an open economy and has a high per capita income and a sizable annual trade surplus (cia.gov 2015). The country has transformed from an impoverished region to a modern state with a high standard of living since the discovery of oil in the UAE more than 30 years ago. The government increased the spending on job creating and infrastructure expansion, and offered full foreign ownership with zero taxes, this causes to captivate more on foreign investors. There was a financial crisis in the UAE during 2008 which the UAE authorities tried to blunt the crisis by increasing the spending in the banking sector. Dependence on oil and the growing inflation throughout the years are pressurizing and gives the country a significant long-term challenge. The UAE is looking forward to their future for providing more jobs to the people through improved education and also by increasing the private sector employment.  A real GDP stands for Real Gross Domestic Product; it comes from a macroeconomic measure of the value of economic output adjusted for price changes. Due to inflation, GDP will then increase and it does not actually reflect the growth of an economy, so inflation rate is subtracted from the GDP to get the real GDP. [pic 1]Indexmundi.com, (2015). United Arab Emirates – GDP – real growth rate – Historical Data Graphs per Year. [online] Available at:
The Inflation rate of the average consumer prices on year-on-year changes of the United Arab Emirates is produced in the chart below. By comparing the two charts of the Real GDP of UAE and the inflation, it is obvious that the inflation has been decreased with the real GDP decreasing. Since the Inflation rate shows that it is decreasing it means that the prices of good and services are increasing at a slower rate than ever before. The Disinflation (decreasing inflation rates) that the UAE is undergoing encourages people to reduce debt and become financially much responsible. As the decrease in inflation it becomes less advantageous to carry high debt, and so when inflation rates fall, people tend to get rid of their debt. Looking at the Inflation rates, it does come to me to think of the interest rates as the inflation rates fall. While inflation rates fall, so do the interest rates. However, even after the great depression, the percentage of inflation has never recovered. [pic 2]Indexmundi.com, (2015). United Arab Emirates Inflation rate (consumer prices) – Economy. [online] Available at: