Economic Performance - Key Performance Indicators, Monetary and Fiscal Policies - Statistics Project Example

Table of Contents Introduction 2 Economic Performance 2 Key Performance Indicators 4 Monetary Policies 6 Fiscal Policies 7 Priorities for future growth 9 Conclusion 10 References 11 Introduction The performance of an economy is largely shaped by the different economic indicators and the manner in which the indicators perform. Having policies in tune with the changing economic scenario helps to formulate strategies through which sustained growth can be achieved. This report looks at evaluating the manner in which the UAE economy has performed over the last 5 years and analyzes the different economic indicators based on which expected future performance is being analyzed. The report also looks into the monetary and fiscal policies and brings forward the different economic indicator based on which evaluation of the economy on the whole is being carried out. This will help to understand the manner in which different variables are impacting the overall performance of the economy and will help to identify the future areas through which performance can be shaped in the future. Economic Performance There are different indicators which are used to analyze the performance of the economy but some of the most economic indicators are GDP growth rate and CPI performance. The above mentioned indicators are a culmination of different individual and micro level indicators. GDP and CPI also looks to ensure that the monetary and fiscal policies and the impact it has on the economy is included and based on it the manner in which the economy has performed and is expected to perform in the future is analyzed. The economic performance and the projections based on GDP and CPI for UAE economy is as The indicators highlight improvement in the GDP growth rate which is a good sign and brings forward the fact that the economy is slowly growing and recovering. The CPI on the other hand is decreasing which needs to be looked at as industrial production otherwise will be hampered over a longer period of time (Jahangir and Chinoy, 2012). The projections bring forward the manner in which the economy is looking to work on different areas and are aiming towards sustained growth rates in the future. A more detailed look at the different economic indicators which has shaped the performance of the UAE economy highlights the following The indicators bring forward the manner in which a different factor have contributed towards slowdown of the economy and is slowly reviving as the global economic conditions are improving. A look at the manner in which monetary and fiscal policies were changed and adopted will help to understand the performance and lay down the path for future performance. The different indicators helps to understand the areas which the UAE economy needs to lay stress on and improve the performance so that productivity multiplies and better results can be achieved. Key Performance Indicators The different key indicators which highlights performance of the UAE economy and the different dimensions are as GDP & Other Indicators: GDP at constant prices and basic prices have considerably increased and grown over the years which have thereby ensured that the overall performance has increased. The increase in the GDP rates has resulted in ensuring better employment opportunities, increase in investment and mobilizing of funds so that the framework looks at improving the performance (Nicolas, Martin and Mayer, 2012). The same has been reflected in the increase in national per capital income which has grown and ensures that people are spend more which would lead towards multiplying productivity and improving the overall production rates. Production: The index for industrial production shows growth and has increased which confronts to the fact that industrial production has increased. This has transformed into better productivity, better mobilizing of saving, induced investment and overall increase in employment opportunities. This has led towards increase in electricity generation which has ensured that more and more production can be carried out as continuous and uninterrupted supply of electricity can be ensured (Nicolas, Martin and Mayer, 2012). This has thereby helped to ensure that the framework looks towards multiplying the chances of increasing productivity and would lead towards ensuring more and more industrial production. Improvement in production would mean more investment which would ensure better mobilization of savings and would help the economy to move towards new height which would thereby control the entire economy and would lead towards better production rates. Prices: The CPI and WPI has reduced to a large extent and has become possible due to the different changes that the monetary and fiscal policies have undergone. This has resulted in having better policies which are supportive of growth and development. The control on inflation has led towards increasing investment, mobilizing savings and generating more employment opportunities so that improvement can be witnessed in growth rates (Nicolas, Martin and Mayer, 2012). Controlling inflation would mean that the monetary and fiscal policies will be able to reap better benefits and would thereby help to transform the economy towards improved GDP rates. The different indicators bring forward the manner in which different areas were which helps to improve economic performance were being emphasised on. This has helped to ensure that the policies were supportive of growth and would lead towards improving the performance in the future as well. Monetary Policies Despite having a pessimist outlook of growth in the global economy the UAE economy performed strongly and the real GDP turned out to be stronger as seen in the table above. Strong growth rate started to get reflected towards high inflation rates especially the food inflation which rose considerably. This was matched by high inflationary prices which was prevalent across global economy in the commodity sector multiplied the overall pressure on local commodity prices. The government has to adopt monetary strategies to deal with those and look towards monetary stimulus so that economic conditions could be controlled. The government through the monetary policy used a range of instruments like sterilized intervention to manage the capital flow within the economy. One of the reasons for high inflationary conditions was the minimum support prices which the government has warranted to protect the interest of the farmers. The MSP for various crops were significantly raised which impacted the consumer price index and resulted in the price of commodities to rise considerably. The monetary changes can also be witnessed in the manner in which real interest rates were being witnessed. Real policy rates moved from being negative to being positive and highlighted the manner in which prices were rising and inflationary conditions were being witnessed as shown below (Rajiv and Kumar, 2013) The real commercial paper rates were increased and similar movement was seen in the commercial banking rates as banks moved from benchmark prime lending rates to base rate system which thereby led towards more money in the system and thereby chasing few products led towards an increase in the prices. The future forecast based on the monetary policies look towards controlling the money supply in the economy so that inflationary conditions can be controlled. Controlling inflation will help to ensure that the other economic indicators are able to generate more and more positivity and will thereby witness growth in real GDP. The monetary policies will have to undergo the changes keeping in mind the changing global business environment and will help to look at controlling inflation, increasing investment, mobilizing savings and generating more employment opportunities so that improvement can be witnessed in growth rates. Fiscal Policies The government has resorted to fiscal stimulus to control the slowdown so that the economy can grow at a faster rate. The nominal and real interest rates had undergone phenomenal changes and looked towards accommodating the manner in which money supply within the economy was controlled. This is seen below (Rajiv and Kumar, 2013) The fiscal stimulus helped to deal with the global slowdown as real expenditure from the government increased. The increase in subsidies due to subsidy being provided in fertilizers and subsidy to control the rate for rising prices of crude oil led towards determining the fiscal deficit and the government has to resort towards fiscal stimulus. The government issues bond in lieu of subsidies so that more money can be brought within the system so that fiscal control could be better controlled. The fiscal multiplier has increased and has ensured that the capital outlay exceeds the consumption which has resulted in increasing deficit. This is being matched by the fact that the gross tax collection has reduced as income tax and corporate tax hasn’t changed (Menzie, 2006). The decrease in tax/GDP ratio due to change in indirect tax has resulted in drastic changes in tax collection and has thereby slowed down the growth of the manufacturing sector. The government in the future has to look at mobilizing fiscal stimulus so that investment can be increased and more and more can be used in different directions. The fiscal policies will have to undergo the changes keeping in mind the changing global business environment and will help to look at controlling inflation, increasing investment, mobilizing savings and generating more employment opportunities so that improvement can be witnessed in growth rates. The framework will have to look at developing policies through which better control can be achieved so that the fiscal structure supports growth and ensure increase in growth rates. Priorities for future growth The UAE economy based on the different economic indicators which has been identified has to look at different priorities which has been highlighted by the indicators and are as Reduce administrative and regulatory burden on business houses: The administrative and regulatory rules in relation to starting a business or closing down a business or acquiring a land are cumbersome and the final result is also uncertain. This rules need to be simplified to ensure better growth and the government can resort to strategies like single clearance window, having certain time line within which the issues will resolved and so on (Caroline and Pierola, 2012). Working and improving those areas will help to ensure better productivity and will improve the overall performance of the economy. Simplify and modernize the laws in relation to employees: The labour laws are complex and stringent especially employee protection legislation which has raised concerns for big industrial houses. The impact is being witnessed toward reduced labour dynamics and reduced the workforce. The government has to look at reducing the compliance by having a single window and has to look at identifying ways through which labour laws will be supportive of business development. Having more flexible labour laws will ensure that employees and employer relation will improve and would thereby transform into better business opportunities. Undertake wide financial reforms: Reforms which helps to develop an efficient financial system which is dynamic and support investment will help to give the required boost which is needed for development. The government has already taken steps by allowing banks to open branches without permission and allowing foreign banks to open subsidiaries. Similar steps need to be taken in the future so that the framework looks at improving the financial sector and provides more avenue for investment. Conclusion The paper thereby highlights the different economic indicators which have helped to evaluate the performance of the UAE economy. This helps to understand the different directives based on which the future performance can be understood and the manner in which productivity, GDP and employment can be improved. The overall dimensions shows improvement in performance and forecast better performance. This will help the UAE economy to be able to work on important dimensions and bring about the required changes through which performance can be improved. References Caroline, F. and Pierola, M. (2012). Export Surges. Journal of Development Economics, 97, 387-395 Jahangir, A. and Chinoy, S. (2012), UAE: More Open Than You Think. Economic Research, J.P.Morgan Menzie, C. (2006). A Primer on Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows and Competitive Devaluation. Open Economies Review, 17, 115–143. Nicolas, N., Martin, P. and Mayer, T. (2012). How do Different Exporters React to Exchange Rate Changes? Quarterly Journal of Economics, 127, 437-492 Rajiv, J. and Kumar, P. (2013). Size of Government Expenditure Multipliers in UAE: A Structural VAR Analysis. Working Paper 07/2013, Reserve Bank. Read More