Financial Sector in the UAE Essay Example | Topics and Well Written Essays - 1750 words

Financial Sector in the UAE - Essay Example Subsequent to that, financial sector, employment and UAE’s GDP have been elaborated. Then, monetary policy effectiveness has been included. Inflation is provided before the balance of payments; and, before the summary, trade has been described. Financial Sector of the UAE The financial sector works as the backbone of the UAE’s economy. The financial services sector plays a pivotal role and has significantly contributed towards the diversification of the UAE’s economic strategy. And, Abu Dhabi and Dubai’s financial sectors, which are the main contributors of the UAE’s economy, from 2007 to 2008, registered their contribution of 40.7% and 41.7 % respectively (KAMCO Research, 2011). However, the subsequent wave of the global financial crisis greatly affected the profitability of the financial sector and at the same time, credit conditions also shrunk to a considerable extent. And, this fact can be authenticated by the provided contribution of the finan cial sector in the year of 2007 was 7.1% and which declined in 2008 to the level of 6.8 %. Its implications appeared in the shape of a decline in liquidity levels along with the reduction in the ability of the financial institutions to provide the same level of credit facilities that they used to provide before the emergence of the global financial crisis; and, the impacts of the crisis were so severe that the leaders of Abu Dhabi were required to intervene and provide financial assistance to Dubai; whose share of the financial sector declined and reached to the level of 39.7 % whilst Abu Dhabi’s inclined to 41.4% in the year of 2008; and, the same year observed in the reduction of foreign lending activity as well. However, despite the impacts of the global financial crisis and the subsequent reduction of the financial sector towards the UAE’s economy, the parallel growth in the non-oil sector even in the crisis period, the UAE’s budget surplus and the export ea rnings, which provide a considerable portion of economic output, have provided a fundamental source of the funding, necessary to feed the needs of the existing infrastructure and developments projects. Financial Sector, Employment and UAE’s GDP The service sector in the UAE contributes employment to 58 percent of the total workforce (Shihab, 2001). And, the service sector consists of trade, restaurants, transport, hotels, communication, storage, finance, real estate, insurance, community, business service, personal and social services. And, this highlights the importance of the financial sectors towards employment in the country. And, the rest of section of employment is provided by the oil industry; which is the main source of inflows. And, the level of employment provided by the oil sector can also be understood from the fact that the UAE’s is third largest oil producing country in the world. Undoubtedly, this highlights the significance of the financial sector, in w hich a considerable number of foreign and local banks serve in the country, for the GPD of UAE in terms of employment. And, in terms of GDP distribution by the seven emirates, the contribution of Abu Dhabi towards the UAE’s GDP is the biggest; and, is followed by the emirates of Dubai and Sharjah respectively. During the period of 2004 to 2008, Abu Dhabi’s aggregate contribution for the UAE’s GDP remained 53% to 57% during the period. In the year of 2008, Abu Dhabi’