Macroeconomics
Introduction
The economy of the United Kingdom is one of the tops ten economies in the world. This is measured using the purchasing power of the country and the gross domestic profit (GDP). The main sources of income in the country are the hospitality and tourism sectors, taxes collected by the central and local governments, the agricultural industry, the construction and real estate industry, the mining and quarry industry, the education and healthcare sectors. The transport sectors especially the airports, such as the London Heathrow and London Stansted and the Gatwick Airport, being the airports with the highest passenger airlines traffic in the world, contribute greatly to the economy. The main industries that contribute to the country’s economy are the automotive, entertainment, military and defense equipment, the entertainment industry, pharmaceutical and biotechnology industry (Sloman, 2003). Tobacco, beverages, computer programming, clothing, textile and chemical industry are an important source of income for the United Kingdom. The government expenditure in the United Kingdom includes import goods, such as fuels, manufactured goods, machinery and foodstuffs.
Abu Dhabi is the capital of the United Arab Emirates (UAE). Abu Dhabi is the wealthiest and largest among the United Arab Emirates. The sources of income of the city include tourism and hospitality; the export industry mainly consists of oil export, pearl, construction and real estate industry. The main industries that provide an income to the country’s economy are petroleum, fishing, cement, fertilizers, commercial repairs for ships, textiles and handicrafts, aluminum and plane building, the exportation of dates and natural gases and overseas investments held by Abu Dhabi. The expenditure of the city is mainly importation of machinery, foodstuffs, transport equipment and petrochemicals, government expenditure on development and civil servant salaries. The emirate is the one responsible for the highest oil and natural gas output in the UAE.
The Economy in the UAE
The economy in the UAE has grown mainly due to the increase in government spending, increased oil prices, growth in the tourism, transport, and trade industry. Also, solidarity among the emirates which involves the combination of the economies of the emirates by their federal government has contributed to this growth and success.
Banks in the UAE
Banks in the United Arab Emirates are an important source of income. The popularity of the shares of the banks of the First Gulf, which is controlled by the family in power in Abu Dhabi, increased in 2009. There was a 3.8% increase in the bank’s share purchases. The Abu Dhabi Commercial Bank shares also increased. This allows the emirate to benefit from the foreign exchange sector. The banking index of Abu Dhabi trades at 9.6 percent of its estimated earnings. They are trading at what is recorded to be the way below the value in the book and is considered the cheapest in the region which attracts more investors. According to Bloomberg analysts, the First Gulf Bank profit rose by up to 15% in 2009 (McCoy, 2009).
Increase in its GDP
In 2004, Abu Dhabi recorded a 7.8% increase in its GDP from the previous year. The increase exceeding 103 billion dollars was attributed to the 10% growth in the non-oil sources of income. The expenditure in 2004 calculated by the government recorded a small deficit in the year’s budget of about 233 milliion dollars calculated as 0.2% of the emirate’s GDP. This was an improvement to the deficit of about 4.5% of the GDP in 2003. The inflation rate of the emirate rose to a recorded 4.5% in 2004, according to the government calculations. This rise was ascribed to the increase in the domestic expenditure due to an increase in the price of oil, higher expenditure by the government, reduced interest rates and increase in the population. The inflation was projected to increase to 6% by 2006 (Kolodko, 2012).
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- The services sector contributed to the emirate’s 2004 gross domestic product. This includes government services and financial enterprises. The contribution produced by this sector was 42.1% in 2004 and 45.2% of the GDP in 2003. The sector also employed more than 1.4 million employees in 2004 and 1.3 million people in 2003, which accounts for more than 60 percent of the total workforce. This also reduced the percentage of unemployment in the emirate.
- The agricultural sector represented a small percentage of 2.7 percent of the total income, a small portion due to the adverse climates experienced in the previous year. The pearl industry collapsed due to the introduction and commercialization of cultured pearls. Fishing also was being done mainly for the domestic use.
- The capital expenditure by Abu Dhabi started to rise in 2009 to its highest level. This was in relation to a decline in the emirate’s income. The fall in income came as a result of the fall in the crude oil prices by about 30%. Spending on development came accounted for 39.2% of the overall expenditure in 2008. Expenditure on salaries for civil servants was cut to one of its lowest levels of about 60.8% in 2009. Expenditure for government projects rose to 10.9% in 2009 from 7.2% in 2008. There was also a sharp decline in the surplus report of 2009. The surplus stood around Dh 3.5 billion in 2009 in comparison to the Dh (Dirham) 197 billion in 2008 (McCoy, 2009).
This high expenditure rate remained unchanged in 2010 as a result of the steps taken by the Abu Dhabi government to outlast the global fiscal crisis of 2008. The expenditure was at 38.3% in 2010. Current spending on civil servants salaries was about 61.7% of the total expenditure in 2010; this was attributed to an increase to 12.49% from 10.9% in 2009 of the allocations for public development projects under the government.
The Manufacturing Industry
The manufacturing industry, which is a major source of revenue for Abu Dhabi, the growth rate doubled in 2011 from 11% in 2010 to 22%. This was attributed to the success of the initiatives by the Abu Dhabi government to develop the industrial sector. The Abu Dhabi economic financial report of 2012 shows that the country’s Gross Domestic Profit has achieved an increase in 2011. The increase of about 30% has been documented to a GDP of 806 billion. This was evidence that the emirate had survived the global economic crisis. This is supported by the increase in oil prices. Abu Dhabi recorded an increase in its oil earnings in 2010 of Dh278 billion from Dh198 billion in 2009, this was due to both higher prices and increased output. There was an increase in the capital revenue earned from both investment incomes and public department income from 2.7% of total revenue in 2009 to 10.1% in 2010. Capital revenue was recorded as higher than oil earnings in 2010. This showed that Abu Dhabi’s policies for economic diversification were making progress.
Foreign Trade
The value of Abu Dhabi foreign trade increased from about AED 174 billion in 2004 to 478 billion in 2008, but there was a decline to AED 425 billion in 2009. The decline was ascribed to a decline in the reduction in demand for commodities and lowered prices during the global fiscal crisis. The trade surplus for the emirate reduced by 22.7% in 2009 and there was also a drop in the emirate’s global oil export. In 2009, the oil export from Abu Dhabi fell by 18.7%. The value of non-oil products rose to about AED 93.9 billion, a 3.98% increase in 2009. In reference to exports and imports, Abu Dhabi is important in that its large exports have the ability to cover its commodity imports at rates exceeding 400% over the years 2004-2009. This means that the emirate’s exports helped in the country’s process of economic development and meeting the needs of its population.
The total size of the workforce in the emirate of Abu Dhabi continued to rise from 815,000 in 2005 to 919,000 in 2008. The annual growth rate of about 4.1% was calculated. This reflected in the drop of the emirate’s rate of unemployment to about 3.2% in 2008. This is an indicator of the emirate’s efforts to sustain economic growth.
The GDP for Abu Dhabi rose to about 248 billion dollars in 2012, a rise of approximately eight percent from the previous year. The data shows that non-oil sectors have increased in their earnings to 9.6 percent. These sectors, such as the real estate and education sectors show a 15% increase in income earnings.
The Economic Environment
The economic environment seen in 2013 is very promising. The increase in confidence and earning of non-oil sectors, such as real estate is seen to be very positive. The average price of a house in Abu Dhabi increased by 9% in 2012, and it is expected to affect the economy greatly. The economists within the international monetary fund project a 3.8 percent economic growth rate in 2015.
The economic reports of the Emirate of Abu Dhabi documented over the years, from 2004 to 2012, show that the non-oil income generators maintained a positive growth rate as seen over the years. This describes the emirate’s strategy to continue with the promotion of the economic base and reduce the dependence on oil and its products. This is with the aim of achieving sustainable sources of income and development.
