The Economies Of The UAE And South Korea - Essay Example

ECONOMIES OF UAE AND SOUTH KOREA Student’s Name Course Professor’s Name University City Date Economies of UAE and South Korea Both the United Arab Emirates South Korea have large economies. However, the factors that contribute to the growth of the gross domestic products are different in both countries. However, there are some economic characteristics in the United Arab Emirates economy that make it similar to the economy of the South Korea. Therefore about UAE and the South Korean economies, the gross domestic product, inflation, imports plus exports and the labor and unemployment are some of the factors that help to define the similarities and the differences between the two economies. The economy of UAE Over the years, the United Arab Emirates have been diversifying its economy. The United Arab Emirates economy is viewed as the second-largest economy after that of the Saudi Arabia in the Arab World (IBP 2016). However, although the UAE has been diversifying its economy, the central reliant of the economy remains to be oil especially in Abu Dhabi with Dubai as the only exception. During the year 2009, the economy of the UAE was based on the exportation of oil. The Gross Domestic Product Various economists have calculated the real growth of the gross domestic product of the year 2014 and found it at 7.4 percent thus the GDP grew to the figure around US$103 billion. In the period of the years ranging from 1990 and 2006, the real gross domestic product of the United Arab Emirates was adamant which was necessitated by investment in other sectors than relying on oil as the primary investment area. In the recent years, the gross domestic product of the United Arab Emirates expanded by 3.90 percent in the year 2015. According to Tradingeconomics.com (2017), the average growth rate of the gross domestic product of the United Arab Emirates recorded the figure of around 4.76 percent from the year 2000 to the year 2015. UAE economy falls as the prices of the oil falls and vice versa since it is its main products which contribute to the growth of the economy. Inflation The inflation rate of the UAE has been rising sharply over the years considering that the economy is an oil based economy. In the year 2014, the inflation rate rose sharply hitting approximately around 4.5 percent which is according to the government reports and figures (Arabian Business 2017). Moreover, the increase in the inflation rate of the economy of UAE is attributed to the low-interest rates, higher government spending, surge in the domestic demand for oil which was attributed to the increasing prices in the international market and finally the high level of population growth. In the year 2015, economists had estimated that the inflation rate would increase to a percentage of approximately 6. In March 2017, the inflation rate in the United Arab Emirates was recorded at 3 percent. However, this is an increase in the inflation rate as it had registered a figure of around 2.7 percent in the previous month of February 2017(Tradingeconomics.com 2017). When the inflation rate is high in the economy, the economy will fall while the standard of living will rise but when the inflation lowers, the economy of a country experiences a growth and the living standard lowers. Agriculture Due to the adverse conditions like the poor nutrient soil and high temperatures during summer in the United Arab Emirates, for the past years, agriculture just represented a slight proportion of the gross domestic product in the United Arab Emirate’s economy. A percentage of about 7 percent of the United Arab Emirate’s population have been employed in the agricultural in the past 20 years, but the vast population is employed in the farming sector. Regarding the area cultivated, dates are the major crop that is majorly grown in the UAE. The other main types of the products include the dairy products, the eggs and their poultry. Fishing and pearl diving were also contributing to the economy of the UAE. However, the pearl economy collapsed as a result of the emergence of the cultured pearls type. Moreover, fishing is the UAE has been done majorly for domestic consumption and fishing industries have not been developed in the United Arab Emirates, and therefore the surplus number of fish that is caught which exceeds the local demand is exported or taken back to the sea. Agriculture is one of the factors that contribute to the growth of an economy since it helps to reduce the consumer price index as the prices of the commodities go down due to their increased supply from the agricultural sector. Imports The major imports of the United Arab Emirates are the pearls and other precious metals and also stones which constitute the 31 percent of the total imports. Sound recorders, reproducers and the machinery account for 18 percent of the total imports. Transportation vehicles follow in the importation of products which account for 12 percent of the total imports. Other products that are introduced by the UAE include the base metals and articles which account for 9 percent and also the chemicals and other related products which account for 6 percent. The main import partners of the UAE includes India which accounts for 17 percent, China at 9.1 percent and the United States at 9 percent (Kenney 2011). The other importers include Japan, Germany and South Korea. Moreover, the imports in the UAE are expected to rise continuously over the years. Exports The United Arab Emirates is the second largest importer of the Saudi Arabia region. The UAE and India are trading partners with India having many of its citizens working and living in the United Arab Emirates. Moreover, the major exports from the United Arab Emirates include petroleum oil, Diamonds, articles of jewellery and gold or the gold which has been plated with platinum. For instance, between the year 2000 and 2010, the United Arab Emirates exported a total of US$82.7 billion which was projected to increase in the future years. Also, in the export sector, the hydrocarbon products account for the greatest percentage of about 60 percent of the total exports from the UAE (Zumerchik 2001). The remaining 40 percent account for other non-oil products thus making oil the major export in the United Arab Emirates. An increase in the demand of the products will result in the growth of an economy while the low demand of exports from a market will lead to the lower economic growth. Labor unemployment at the UAE The unemployment level in the United Arab Emirates measures the rate of people actively seeking jobs as labor force percentage. About this, the level of unemployment in the United Arab Emirates has been increasing gradually over the years from the year 2009 to the year 2016. For instance, in the year 2016, the unemployment rate decreased to 3.69 percent from 3.81 percent in the year 2015. An economy with a reducing unemployment rate indicates how the economy is stable. Moreover, the unemployment rate in a poor economy is very high and continues to increase with the worsening economy. Therefore, the economy of UAE is somehow stable from the indication of the unemployment rate in the country. When the economy is unstable, the unemployment rate remains high and the GDP tends to be low and vice versa. The South Korean economy The South Korean economy is regarded as one of the major economies in the world, and it is the twelfth largest economies in the globe rated by the purchasing power parity. Additionally, the economy of South Korea is estimated as the third in the continent of Asia coming behind Japan and China (Hart-Landsberg, Jeong & Westra 2007). It is a country that has experienced economic growth as a result of great exportation which accounts for about 70 percent of its economy (World Bank 2017). During the year 1950, South Korea was among the poorest economies in the Asian continent. Also, during the Korean War that followed in the World War II, most of the infrastructure of the South Korea was destroyed, and the country started relying on the U.S aid (Southkoreagovernment.com, 2017). However, the military coup that was led by General Park Chung-hee, in the year 1962, the country adopted a five years economic development plan which helped it recover. Gross Domestic Product (GDP) of South Korea The GDP of South Korea rose by a percentage of 0.9 percent in the fourth quarter of the year 2016 compared to the third quarter of the same year. Additionally, in the annual growth rate of the GDP, the country experienced an annual growth of 2.8 percent which was similar growth that was experienced in the year 2015 but a drop if compared to that of the year 2014 since country experienced a growth of 3.3 percent in its GDP. During the year 2015, the gross domestic product of South Korea was $1377.87 billion calculated based on the U.S dollars. Additionally, from the year 1960 until the year 2015, the average gross domestic product of the South Korean Government has been 387.10 USD where the highest GDP in the mean was experienced in the year 2014 when the GDP was 1411.33 USD billion (Tradingeconomics.com 2017). Also, the lowest gross domestic product that was encountered in the period was faced in the year 1961 when the GDP was as low as 2.36 USD billion. In relation to this, the slow growth of GDP in South Korea is mainly caused by the demand of the export. When the demand of the export is high, the GDP rises and vice versa. Inflation The inflation rate of the South Korea slowed in the month of April to about 1.9 percent from 2.2 percent in the month of March. To measure the inflation, the consumer price index percentage is measured compared to the consumer price index of the preceding period (Media 2017). Therefore, this is a decrease of 0.3 percent compared to which was slightly below the expectation of 2.0 percent. About slow rate of inflation, the resultant low rate of inflation can be explained by the softer growth of the food prices plus beverages and transport in the country. Between the year 1966 and 2017, the inflation rate of South Korea has recorded an average rate of 7.50 percent. The inflation rate that recorded the highest rate of inflation in the period used to calculate the average was the year 1980 where the inflation rose to 32.50 percent in October (Tradingeconomics.com 2017). Moreover, the low rate of inflation which has been recorded in the South Korea was as low as 0.2 percent which has been registered during the year 1999 in the month of February. The prices of food and beverages increased at a softer rate which 2.6 percent from the 3.5 percent recorded in March. In addition to this, the clothing and footwear prices rose by 0.2 percent compared to that of the previous month which was 1.2 percent (Tradingeconomics.com 2017). Transport, on the other hand, increased at a softer rate of 5.4 percent compared to the rate of 6.4 percent in the previous month. On a monthly basis, the consumer price index decreased by 0.1 percent thus contribution to the lowering rate of inflation from 2.2 % to 1.9 %. Therefore, the reason for the increase of inflation is due to the decrease of prices of the consumables. When the price of the consumables rises, the inflation rises lowering the economy and therefore rising the standard of living and vice versa. Agriculture During the initial years, agriculture contributed to almost 50 percent of the nation’s gross domestic market in the South Korea. However, the figure has been lowering since the year 1980 where it fell to 15 percent and has stayed at 5 percent in the year 1998 (Tradingeconomics.com 2017). The reason why the contribution of agriculture to the GDP has been dropping is that the country has been shifting its investment to the industrial sector. The agricultural sector which is composed of forestry, hunting, fishing and cultivation of crops and livestock rearing contributes a slight percentage of the GDP which accounts for only 2.3 percent. The reason is because of the rising labor cost and urbanization are causing people to move away from agriculture. Also, the landscape of the country is rugged which discourage agriculture accounting for only 16 percent. Therefore, the low concentration of agriculture by the nation makes South Korea depend on imports from other countries like the U.S where agriculture is well established. Imports The total value of imports in South Korea has a figure of around 417.9 billion U.S dollars. The first imports that are imported in the country include products such as machinery, plastics, agricultural products, transport equipment, oil, organic chemicals and steel. The main partners that the country deals with in the importation of goods include China which accounts for 16.8 percent, Japan at 15 percent, the United States at 9 percent, the Saudi Arabia which accounts for 6.1 percent and the Australia which accounts for 4.6 percent (Tradingeconomics.com 2017). Therefore, the primary import partner is China while Australia accounts for the least in the major importers. If the prices of the imports goes higher, the conomy of a country lowers but if they are affordable, they do not tend to affect the economy in a negative way. The exports The value of the exports is higher than the value of the exports in the South Korea where the GDP accounts for about 466.3 billion dollars. The primary products that are shipped from South Korea include the wireless telecommunications equipment, steel ships, petrochemicals and the semiconductors. Also, the main export partners of the South Korea includes China, U.S, Japan and Hong Kong. China accounts for the greatest percentage where it accounts for about 23.2 proportion of the total exports while the Hong Kong accounts for about accounts 5.3 percent of the total exports. Exports contribute to the economy Labor and Unemployment The unemployment rate in South Korea increased from 3.7 percent in March 2017 to about 4 percent in the month of April 2017. Also, the number of persons who were unemployed went up by 75 thousand reaching some 1098 thousands while employment went down to 26511 by 111 thousand people. In a year ago, the unemployment rate of people in the South Korea was ranging at 3.7 percent. Between the year 1999 and 2017, the average employment rate of South Korea has recorded a percentage of 3.64 percent. About this, the highest unemployment rate was experienced in the year 1999 in the month of June when the jobless rate hit 7.10 percent (Tradingeconomics.com 2017). Also, the lowest unemployment rate was recorded in the year 2013 in the month of November when the unemployment rate was 2.90 percent. During bad economic times, the economy of a nation tends to increase to Comparison of the two economies Differences The economy of the United Arab Emirates is an economy that has not received significant diversification. The reason is that oil is seen as the primary product which contributes to the up to 60 percent of the GDP (Al Abed 2001). However, the growth of the gross domestic product of the South Korean economy by investment in the manufacturing and industrialization sector. Therefore, the increase of the gross domestic product in the two countries is necessitated by two major products which are different in each of the respective country. The inflation rate of the United Arab Emirates is relatively sharp compared the inflation rate of the South Korea. The reason why the inflation rate of the UAE is sharp is that of the demand of the oil prices (Tradingeconomics.com 2017). On the other hand, the rate of inflation of South Korea nation is because of the decrease in the consumer prices of commodities. In short, inflation is experienced in the economies of the two nations but the causing factors of inflation in the economies are different. The Similarity in the Two Economies The economy of the United Arab Emirates possesses a similarity when it comes to the contribution of the agricultural sector to the gross domestic product of the economy. In both economies, agriculture accounts for a little percentage which contributes to the gross domestic product of the two nations. Therefore, the two countries do not primarily rely on agriculture as a factor to grow their economy (Tradingeconomics.com 2017). Also, the average unemployment rate in both economies is the same as it lies in figure around 3 percent. Also, the economy in the two countries relies on exports as their major contribution to the growth of the economy. UAE mainly relies on the exportation of oil so as to achieve growth of the economy. On the other hand, South Korea relies on manufactured products, like machines and exports them to the other markets. Analysis for the Future Growth of the Two Economies The future economic analysis of the UAE is expected to grow at a rate of 4.3 percent by 2020 on the gross domestic product. The reason for the increase will be due to the increase in the oil prices by the year 2020 and the related Expo2020. According to Middle East intelligence service, the growing public and private sector and also the recovering oil prices will see the economy of UAE grow by more than 4 percent compared to the 3.1 percent that happened in the year 2016 (Report 2017). The economy of South Korea has been growing at a moderate pace in the year 2016 which was necessitated by the low interest rates and also the supplementary budget to the economy. Moreover, the economy of South Korea is expected to grow at a higher percentage of more than 2 percent according to the International Monetary Fund report in the year though the UN and EC predict that the economic growth will remain constant (Knoema 2017). During the year 2018, the real GDP of South Korea is expected to grow at 2.8 percent while the consumer price index will grow at 1.9 percent in the same year (imf.org 2017). Regulation of the interest rates of debts will be maintained in order to ensure that the economy grows at that percentage. Conclusion A country’ economy experiences growth in the gross domestic product due to the increase of the economic variables which vary from one nation to the other. Therefore, the economy of one country might differ from one another due to the difference in the economic characteristics of one nation to the other. Additionally, the economy of two countries might be similar if the economic features that contribute to the growth of the GDP are similar. In short, the economic characteristics present in UAE and South Korea help to describe the economic similarity and differences of economies in the two nations. Also, the economies of the two countries are to grow where the economy of the UAE will grow due to the increase in the oil prices while that of South Korea will grow as a result of more regulation in the interest rates. References Al Abed, I. (2001). United Arab Emirates: a new perspective. London, Trident Press. Arabian Business. (2017). Dubai, Abu Dhabi inflation rates fall from six-year highs. [online] Available at: http://www.arabianbusiness.com/dubai-abu-dhabi-inflation-rates-fall-from-six-year-highs-585454.html [Accessed 15 May 2017]. 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