Case Study - Fiscal Budgets of the United Arab Emirates and Kuwait

Executive summary

This paper examines the fiscal budgets of the United Arab Emirates and Kuwait. Comparison is made on the various components of fiscal budget which include energy, public revenue and expenditure, population and unemployment, employment and environment issues. The standard of Living in UAE is better than Kuwait although the GDP is close to each other where total GDP is 21Billion KWD while UAE IS 23Billion. The data used in this study is drawn from the GCC briefs, ministry of finance Kuwait and UAE, Central Bank of Kuwait and UAE and World Trade Organization trade reviews. All currencies are in Kuwait Dinar (KWD) where 1 USD = 0.284 KWD.

Key words: UAE, Kuwait, fiscal policy, 

Table of Contents

Executive summary 2

Introduction 4

Literature review 4

Methodology and results 7

References 8

A Comparative Analysis of Kuwait and the UAE Fiscal Budgets

Introduction

Kuwait and the UAE implemented the most effective fiscal policies to counter the effects of the global economic recession in the year 2008. Fiscal policies were effective in that, they saved their economies from meltdown. UAE enforced measures such as the law that guaranteed bank deposits, a Dh50 billion liquidity boost facility by the central bank, capital injections by the government into five Abu Dhabi banks, monetary easing measures and higher public spending as part of fiscal stimulus plans. Kuwait on the other hand enforced five fiscal policy measures though it didn’t reflect a clear fiscal stimulus in the country. This was contributed by its low public spending where it remained relatively low. However, Kuwait rescued its nonperforming firms through equity purchases (The UAE Foreign Trade Analytical Report 2010).

Fiscal policy developments should be reflected in the key macroeconomic indicators of real GDP growth, GDP per capita, current account balances and inflation (Merza, Alawin and Bashayreh, 2012). Economic growth in UAE has improved substantially owing to the enforcement of various fiscal measures. Its Gross Domestic Product rose from USD 222.1 billion in 2006 to USD 314.6 billion in 2008. It further rose to USD 350.7 in the year 2010. This impressive improvement in GDP was attributed by the increase in the average oil prices. Furthermore, the UAE economies expanded towards non-oil economic sectors. This has helped the economy to withstand the economic crisis which has affected many economies worldwide. For instance, in 2010 its real GDP stood at 1.4% as opposed to the negative 1.6% which was experienced in the year 2009. This increase was majorly