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UAE’s Main Economic Challenges Essay

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Updated: May 14th, 2020

The United Arab Emirates (UAE) is made of seven emirates which form the federation. The federation is rich in oil and natural gas, which happens to be its major exports and foreign exchange earner. Despite the economy prosperity of the rich oil country, the UAE faces some domestic and external challenges. The paper evaluates UAE’s main economic challenges, domestic issues, and its relations with the rest of the world.

The UAE was not adversely hit by the global financial crises like most of the developed states as its economic growth has been steady but slow. The UAE’s 2013 economic report shows that the property market was affected after property prices declined amid the downturn (Audi Saradar Group 1). As a result, its GDP declined although it has since increased, albeit at a slow pace. In 2012, the CPI for the UAE had increased by 0.7 % as a result of sustained growth of the UAE’s Central Bank foreign assets (Audi Saradar Group 1).

However, Dubai Statistics Centre (DSC) has reported that increase in processing of electricity, housing, water, and gas, hotels, transport, and furniture increased consumer prices (Emirates News Agency 1). Additionally, Economic Report 2013 shows that in 2012, the total CPI had reached 117.29%, which represented a 0.5% increase compared to 2011 (Audi Saradar Group 2). The economy was also affected by inflation of 0.7%, which was a result of increased food prices.

The UAE labor market largely depends on foreigners from all walks of life. Since the 1990s, immigrants have been a major driver of the UAE’s economy as most of the domestic laborers lack the required skills to undertake available jobs (Malit and You 1). For this reason, most of the UAE nationals do not find employment in the skilled labor market. As such, the federation is affected by unemployment issues. For example, in 2011, the unemployment rate in the United Arab Emirates was 11.8% for UAE nationals compared to 1.9% for non-nationals (Abu Dhabi Government 1).

Moreover, the unemployment rate in the total UAE labor force in 2011 was 2.8%, which has so far increased to 4.3%. According to Albuainain (2), the unemployment rate of UAE nationals is higher compared to that of foreigners. This is because most of the nationals are excluded from the workforce as they lack the required skills and expertise. The unemployment rate in the UAE has negative effects on economic growth as the government is forced to spend more on social benefits (Albuainain 1).

The UAE enjoys positive relations with the international community and the rest of the world. For example, the UAE is the largest consumer of U.S goods in the region. A report released by the Congressional Research Service on October 17, 2013, has established that “in 2012, U.S. firms exported nearly $22 billion worth of goods to the UAE. Over 1,000 U.S. companies have offices there, and there are 60,000 Americans working in UAE” (Katzman 26). This means that the UAE positively relates well with major economies like the U.S. Moreover, most of the UAE’s workforce is composed of foreigners from developed and developing nations. Additionally, its foreign policy supports the establishment of peace in the region. However, the UAE has been criticized for its deteriorating human rights situation and trafficking (Katzman 26).

In conclusion, the UAE’s domestic challenges have affected its GDP and economic growth. The global financial crisis affected the growth of the economy, although it has since started to grow steadily. The UAE has a large unemployment rate among its nationals compared to foreign employees. Also, the UAE has positive relations with the international community and the rest of the world, although it has been criticized for its deteriorating human rights situation.

Works Cited

Abu Dhabi Government. Abu Dhabi Emirate: Facts and Figures. 2013. Web.

Albuainain, Reem M. Unemployment Rate in the United Arab Emirates: The Case of Abu Dhabi. Working Paper 0404. 2013. Web.

Audi Saradar Group. UAE Economic Report: Sustained Recovery Prospects despite Lingering Challenges. 2013. Web.

Emirates News Agency. Dubai CPI 03% in October. 2012. Web.

Katzman, Kenneth. “The United Arab Emirates (UAE): Issues for U.S. Policy.” Congressional Research Service. 2013: 1-27. Print.

Malit, Froilan, T and Ali Al Youha. . 2013. Web.

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