Principles of Macroeconomics UAEs main economic challenges, including Essay

Principles of Macroeconomics UAEs main economic challenges, including domestic issues and its relations with the rest of the world - Essay Example After the discovery of oil, the country improved to a moderate nation with high standards of living and a rising GDP (The World Factbook, 2013). However, the country still has certain economic challenges that need to be addressed in order to maintain the economic performance of the country. Those challenges can be addressed in terms of GDP, Growth of the economy, labour force and unemployment rate, foreign relations and CPI and inflation. The major economic challenges of the country are: large expatriate workforce, growing inflation and over-dependence on oil. The World Factbook (2013) suggests that UAE’s GDP has improved since the discovery of oil in the country 30 years ago. However, efforts of diversification of the economy have reduced the proportion of GDP attributable to oil to 25%. This may have a negative impact on the size of GDP of the country if the other sectors of the economy fail to live up to the expected standards of the economy. The country’s GDP was also affected by the global financial crisis of 2009. Tight international credit and deflated asset prices also led to a restrained economy in 2009. Dubai was affected the most by the financial crisis (Dargin & Lim, 2012). It encountered serious depressed real estate prices. Dubai and UAE in general lacked enough money to meet their financial debts; resulting in world concern about its solvency. The total GDP measured in purchasing power parity was measured at $275.8 billion in 2012, ranking the country in position 50 in the world. Per capita GDP of the country in 2012 was $48,400 and the country was ranked 15th in the world. This size of GDP is mainly affected by dependence on oil. In terms of GDP, UAE is ranked behind other oil producing countries in the Middle East such as Saudi Arabia and Iran. This indicates that the GDP performance in the country is poor compared to equally resource-endowed neighbors. To improve this economic performance, the country intends to develop a