Describe the Impact of World Recession on the UAE Economy (Essay Sample)

Impact of world recession on the UAE economy
It was well known that the people who sacrificed their joy, life, family, food and other good things in life were military officers but now they are the shareholders of big and small companies around the world. This great recession started in September 2008 in the United States of America, as a result of breakdown of the large financial institutions in the states. It was as a result of credit crisis within the financial institutions due to accumulation of huge sums of toxic assets, for instance, mortgages that backed securities and debt insurance investments (Abed & Hellyer, 2001).
The collapse of these leading financial organizations led to uncertainty in the world thus leading to spread of the same across the other countries in the world. The impact of the monetary sector failure on activities of the real economic sectors become increasingly obvious, spreading beyond its original epicenters to involve other highly developed economies like Japan, emerging markets like India, and the Arab world, UAE included. This paper intends to analyze the impact of the global financial crisis on United Arab Emirates (UAE). It attempts also to provide an overview of the possible impacts of the crisis on all sectors of the economy and the measures the government has put in place to counter the effects of recession (Abed & Hellyer, 2001).
At the start of recession the prices of oil, natural gas, and other petroleum products increased rapidly. It led to high gains, for instance, in the UAE; the large budget surplus recorded in 2008 due to that increase gave a deficit in 2009 budget. However, food and raw materials were increasing at the same time; they had to cope with it since it was a threat to the economy and social stability. Most of the gains from the oil were ploughed towards the extra cost of raw material and food. Above all, the gain in the oil sector did not last for long since in 2009 the price of oil collapsed due to the financial crisis and the global expectations of reduced growth of economies across the globe. It greatly impacted its terms of trade leading to a decline in the surplus to their budgets (Abed & Hellyer, 2001).
Banks were not spared either; however the impact was not that great since they were not exposed to the United States mortgage and derivatives markets. Losses were incurred by holders of equities, the stock market recorded high decrease in trade and prices of shares among others. For instance, the stock market in Dubai fell by 72% in February 2009. The four most affected banks were National bank of Dubai, Mashreq bank, Dubai Islamic bank, and Emirates bank international. The losses incurred lead to reduced consumption and people were highly discouraged to investment (Abed & Hellyer, 2001).
The tourism and hospitality sectors were not spared either, as we all know that UAE depend on large percentage, 20%, on tourism. As a result of global breakdown many people in the world were affected and travelling was not a necessity even to the rich. This affected the number of tourists visiting UAE thus a decline in the gain of foreign currency. All businesses related either directly or indirect to tourism suffered leading to layoff of emplo...