Financial and economic comparison between Qatar and the United kingdom - Research Paper Example

97,583,513,617 2,183,862,761,501 128,738,144,613 2,155,836,882,035 2010 127,322,413,671 2,256,260,000,000 113,782,317,847 2,194,805,447,471 2011 172,981,588,421 2,445,408,064,516 151,207,682,186 2,383,438,659,372 Table 1 – Comparison of Real GDP and Nominal GDP between Qatar and the UK Table 1 represents a comparison of nominal and real GDP between Qatar and the UK for the years 2000 to 2011. The nominal GDP was used in the calculation of real GDP along with the GDP Deflator. (World Bank 2013a; World Bank 2013b).

According to Kumaranayake (2000) as general price level increases price and cost information needs to be adjusted when making comparisons between different years. The formula used in the calculation of real GDP is stated as follows: Real GDP = (Nominal GDP/(GDP Deflator + 100)) * 100 The Nominal GDP represents the GDP at current market price. It does not take into consideration the fact that inflation has impacted purchasing power in the different countries. In order to account for that the Nominal GDP is divided by the (GDP deflator + 100) and then multiplied by 100.

Therefore, if the annual GDP deflator is 3% and the Nominal GDP is US$1,000,000 then it simply means that the purchasing power in the economy has been reduced by 3% to 97%. By dividing the Nominal GDP by 103 and multiplying by 100, the Real GDP at base year prices are calculated for the period. Table 2 shows the GDP deflator for Qatar and the UK which were used in the calculation of Real GDP. GDP Deflator/Inflation rate Year Qatar UK 2000   0.7 2001 -4.4 1.6 2002 3.1 2.3 2003 17.4 2.5 2004 11.4 2.6 2005 26.3 2.4 2006 18.5 2.9 2007 11.4 2.2 2008 22.

8 3 2009 -24.2 1.3 2010 11.9 2.8 2011 14.4 2.6 Table 2 – GDP Deflator for Qatar and UK 2000 to 2011 The GDP deflator for Qatar is greater than that for the UK. While Qatar shows double digits for all years except 2001 and 2002 with 2001 being negative the UK had single digits for all the years. The GDP deflator for Qatar ranged from -24.2 for 2010 to 26.3 for 2005. The lowest rate was 3.1% in 2002. The UK on the other hand ranged from 0.7% for 2000 and 2.8 in 2010. The differences in their corresponding GDP deflators explain the differences between the Nominal and Real GDP for both countries with Qatar showing greater differences than the UK. Part (b) The graph in Figure 1 shows the trends in nominal and real GDP for Qatar and the UK for the period 2000 to 2011.

Figure 1 – Graph of Trends in Real and Nominal GDP Figure 1 shows the trends in both Nominal and Real GDP for the years 2000 to 2011. The graph shows mainly moderate increases in both variables for Qatar except between 2008 and 2009 when there was a decline in the Nominal GDP and from 2009 to 2010 when there was a decline the real GDP. The reason is that in 2009 the GDP deflator was a negative 24% and so the Real GDP was higher. The UK experienced a slight decline in both variables between 2000 and 2001.

However, there was a steep increase between 2001 and 2004. The increase was moderate between 2004 and 2006 with a steep rise between 2006 and 2007. However between 2007 and