The UAE VS Kuwait Economy

In my blog I will be comparing the UAE with Kuwait in terms of four different aspects. I will compare the two countries in term of full employment, stable prices, economic growth and balance of trade. First of all, I chose to compare the UAE with Kuwait for many various reasons. First of all, its because they are from the same region and they are both are oil based economies, but at the same time each country has a different exchange-rate regime.  In my blog, I will try to compare and see the effect of the currency regime and how it affects the economy.

In terms of Full employment:

In terms of full employment, the UAE and Kuwait unemployment rate is considered low and that’s because both of them are under 5%. As shown in the charts below the UAE and Kuwait unemployment rates are increasing steadily over the years. The UAE unemployment rate is 4.6% whereas Kuwait hold a lower rate of 2.1%. In my opinion, I believe the UAE unemployment rate is much higher because the percentage of expatriates in labour force is much higher than Kuwait. After researching about it in the World Data Bank I found out that 60% of Kuwait Labour force are non-Kuwaitis while on the other hand the 85% of the UAE labour force are non-Emiratis. To conclude about unemployment, the higher the labour force and expats in consisted in it are the main reasons of the difference in unemployment.      

Stable prices

In terms of Stable prices between Kuwait and the UAE we see a big gap between them and I believe the main reason behind that is the currency-rate regime. While the UAE has a pegged dirham to dollar, Kuwait are having a basket of currencies which actually keeps moving the same way as the Euro. By comparing stable prices between the two countries it clearly shows the UAE prices are way more stable than Kuwait, since the UAE has a lower inflation rate and a lower CPI.

UAE

Year	2008	2009	2010	2011	2012
Inflation (annual %)			1.56%	1.73	0.2%
CPI (2005=100)	112.3	114	115	116

Kuwait

Year	2008	2009	2010	2011	2012
Inflation (annual %)			2.8%	6.01%	3.07%
CPI (2005=100)	120.2	125	130	136.2

Economic growth

In terms of economic growth between the two countries it is actually known that the UAE is the second largest in the GCC after Saudi Arabia. The total GDP in the UAE is nearly double of what is in Kuwait, and that is mainly because the UAE is a larger oil producer than Kuwait. In terms of GDP per capita both countries are nearly the same and that is because of population difference; the UAE has a higher population than Kuwait. Finally, in terms of GDP growth over the years it kept fluctuating, but after the economic crisis the UAE had a better GDP growth than Kuwait of 3.2% to 2% respectively.  In conclusion about economic growth, its clearly shown by statistics that the UAE Economic growth is more steady and higher than Kuwait. It is not only because  the UAE is a a bigger producer of oil, it’s because the UAE is also trying to diversify into more than the energy production, by having other industries such as services and tourism.

Kuwait

KEY ECONOMIC DATA	2006	2007	2008	2009	2010
GDP (current or constant USD billions)	101.6	114.7	147.4	105.9	124.3
GDP per capita (USD)	43,191	46,867	57,842	40,022.6	45,448.9
GDP growth (% year)	12.6%	4.7 %	8.5%	-4.6%	2%

UAE

KEY ECONOMIC DATA	2006	2007	2008	2009	2010
GDP (current or constant USD billions)	164.0	200.5	272.7	216.6	234.3
GDP per capita (USD)	38800	44800	57200	46400	49900
GDP growth (% year)	1.7%	2.3%	5.3%	-3.2%	3.2%

Balance of trade

In terms of Balance of trade, both Kuwait and UAE are having a trade surplus and that will always stay constant as long as they are oil based economies. In turns out that the balance of trade is also higher in the UAE way more than Kuwait and the main reason is that the UAE is a larger producer of oil.  The UAE holds a record of $79.5 billion trade surplus, whereas Kuwait has a surplus of $35 billion.  The UAE trade balance is more than two times the surplus of Kuwait. This doesn’t mean that the economy of Kuwait is not doing well it just means that the UAE is a larger exporter than Kuwait.

UAE

Balance of trade	$79.5 billion
Current account	$30.5 million
Imports	$202.1 billion
exports	$281.6 billion

Conclusion

To conclude this blog, we have witnessed that the two economies are actually positive, but the UAE is just a larger economy than Kuwait. Never the less, other economies are suffering just to have a surplus, such as Greece. The UAE is a larger producer of oil, larger in area, and has a higher population. These factors are the main reasons for the UAE to have a larger economy when comparing it to Kuwait. The UAE is ahead by being more diversified and switching from an oil based economy to a diversified economy and that is their goal by 2030 plan.

Useful report about the UAE and its economy

http://www.menafn.com/updates/research_center/UAE/Economic/kamco130411.pdf

Useful report about Kuwait and its economy

http://www.kcic-asia.com/UserFiles/file/Products/Country_Monitors/Kuwait_1304514292_2011.pdf

References:

http://www.kcic-asia.com/UserFiles/file/Products/Country_Monitors/Kuwait_1304514292_2011.pdf

http://www.tradingeconomics.com/united-arab-emirates/indicators

http://www.tradingeconomics.com/kuwait/indicators

http://databank.worldbank.org/Data/Views/VariableSelection/SelectVariables.aspx?source=World%20Development%20Indicators%20and%20Global%20Development%20Finance#S_T

http://www.xe.com/currencycharts/?from=KWD&to=USD&view=5Y