Macroeconomics Assignment: UAE Fiscal and Monetary Policies Analysis

This macroeconomics assignment analyzes the impact of the COVID-19 pandemic on human welfare across both rich and poor countries, detailing the mechanisms through which the virus affects economic indicators like unemployment and poverty. It identifies fiscal and monetary policies, with specific examples from the UAE, designed to mitigate the adverse effects of the pandemic. The assignment then explores the concept of Green GDP, explaining its emergence as a more comprehensive measure of economic well-being than traditional GDP, and discusses the implications of a low Green GDP value. It also examines the reasons behind rising unemployment rates among youth and factors contributing to their inactivity in the labor market. The assignment provides a detailed analysis of macroeconomic principles and their real-world applications during a global crisis.

Running head: MACROECONOMICS
Macroeconomics
Name of the Student
Name of the University
Author Note

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Table of Contents
Answer to question 1:.................................................................................................................2
Pointing out various mechanism on the impact of epidemic on human welfare:......................2
Identifying the impact on the human welfare across poor and rich countries:..........................3
Identification of fiscal and monetary policies to reduce the adverse impact of Covid-19:........4
Monetary and fiscal policies adopted in UAE in March, 2020:.................................................5
Answer to question 2:.................................................................................................................6
Identifying the reasons behind the emergence of Green GDP terminology:.............................6
Implication of low green GDP and its calculation:....................................................................7
Comparing the value of green GDP and real GDP:...................................................................8
Answer to question 3:...............................................................................................................10
Identifying the reasons for increasing unemployment rate amongst youth:............................10
Reasons why the youth chose to be inactive:...........................................................................12

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Answer to question 1:
Pointing out various mechanism on the impact of epidemic on human welfare:
The ongoing pandemic of coronavirus 2019-2020 is an acute respiratory syndrome
which was identified in Wuhan, China in the month of December 2019. Later in January
2020, it was declared as matter of Public Health Emergency of International Concern by
World Health Organization and even later on 11 March, 2020 was declared as a pandemic.
The outbreak of Covid-19 (Coronavirus) wreaked havoc on the economies all around the
world and killing more than 83000 people. It is viewed that such havoc would push half a
billion of people into poverty. All the segments of population, particularly the detrimental
social groups are considered to be the most vulnerable. It is indicated by the earlier evidence
that the poor people are bearing the economic and health impact of the virus
disproportionately. Covid-19 has and is likely to affect the people in geographical locations
of various countries. With the shutdown of industry after industry and firm after firm, it is
evident that there would be increase in the rate of unemployment without pay. It is identified
from the estimates that irrespective of the scenario, there would be an increase in the global
poverty for the first time since 1990.

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Identifying the impact on the human welfare across poor and rich countries:
The poor and developing countries would be disproportionately devastated as they
continue to tackle the health crisis with tremendously limited resources. Such countries
would be socio economically hit and it is stressed that there would be loss in the income
exceeding $220 billion. It is the societies who have to bear the serious repercussions of the
loss of income in the areas such as human right, education and food security. Covid-19 has
taken a number of lives across countries like China, Spain, Italy, Korea, USA, UK, India and
185 countries and territories resulting in nearly 2 lakhs of deaths globally and . In addition to
the loss of human lives this pandemic is having and will continue to have its serious
implications on the labor market outcomes. Apart from the serious concern of the workers’
health and their families, this detrimental virus has been having concerning economic shocks
and will continue having impact on the work world under key major dimensions. This
pandemic will have serious impact on the work sector like in case of unemployment and
underemployment also in the wake of the virus. Also, according to the preliminary ISO, the
effect of covid-19 on the GDP growth globally indicates a rise in the global unemployment of
approximately 5.3 million and 24.7 million in the lower and higher scenario respectively.

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In the high income countries, the mid scenario suggests an increase of nearly 13
percent. Estimates obtained from the ISO is highly uncertain, however the figures show a
substantial increment in the global unemployment. So, this global pandemic will not only
lead to unemployment but will also create a situation where a number of people will be
accepting jobs unmatched to their degree and skill thereby resulting in underemployment and
resulting in rise of underemployment on a large scale. According to previous crisis records,
there is high likelihood in the labor class to face a significant downward adjustments in their
wages and working hours. However in the informal economy, self-employment refers to a
default option for survival or maintaining income so consequently the informal employment
tends to increase. The manufacturing as well as the service provider organizations will have
serious implications on the decline of economic activity arising out of the constraints. In
china, in the first two months of 2020, the total decline of 13.5 percent on the total value
added of industrial enterprises resulting in the overall disruption. The most vulnerable sectors
which are maximum prone to the constraints of this pandemic are the tourism, travel, service
providers and retail services. According to the assessment done by the World Trade and
Tourism Council, a decline in the international arrivals of up to 25 percent in 2020 has been
forecasted thereby risking a million of jobs at risk. Consequently, there are serious
implications suspected on the labor income and working poverty with the decline in the
supply of labor as a result of isolation measures taken up as precautious step by the
government which will lead to economic downfall. A preliminary estimate of up to the mid-
month of March shows that nearly 3000 infected workers have already lost on their jobs with
consequent loss of income in case of the unprotected workers.
According to the important coverage by the economist of the Covid-19, it has been
recorded that this life taking pandemic is creating a havoc in both the rich as well as the poor
countries, however the intensity of suffering of different income scale of people is different

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and the impact particularly on the poor countries can be devastating and this virus is expected
to reach in every country across the globe. In countries like Pakistan, Uganda and other the
expenditure on health is nearly one hundredth the level in America. Historically it is evident
that the poor have been the worst hit by the pandemics. For an instance the Spanish flu has
taken toll on nearly 6 percent of total India’s population.
Identification of fiscal and monetary policies to reduce the adverse impact of Covid-19:
Some fiscal and monetary measured to minimize the adverse impact of the pandemic are
as follows:
 Approval of budget with higher spending on the healthcare sectors and programs
supporting the packages of social security, relief packages to the employees and
workers who lost their jobs and supporting medium and small scale enterprises.
 Lowering the requirement of reserves on the deposits of commercial banks and
increasing the maximum allowance of loan to deposit ratio and lowering the capital
adequacy ratio.
 Stopping all the outgoing foreign transactions by granting new foreign exchange
licenses.
 Increasing expenditure for making an improvement in the virus diagnostic,
construction of hospitals and clinics and purchasing of hospital equipment’s.
 Other fiscal measures in the form of providing income support to the households,
sizeable wage subsidies, investment incentives, cash flow support to the businesses
and targeted measures for affected industries and regions.
 Increasing lending by the banks for supporting the small and medium enterprises by
limiting the holding of the central banks to the commercial banks. In addition to this,

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easing the provision of banks temporarily and classifying the rules of forwarding the
loans.
Monetary and fiscal policies adopted in UAE in March, 2020:
In UAE, the authorities have declared about AED 26.5 billion in various fiscal
measures including AED $4.4 billion approved by the federal government for supporting the
private sector by reducing various government fees and accelerating the existing
infrastructural projects. Also approximately $0.4 billion in measures for decreasing the
government fees and provide additional water and electric power supply. Additionally $2.5
billion is announced by the government of Abu Dhabi as part of the ongoing “Ghadan-21”
fiscal stimulus program. The new initiative would assure the masses with water, electricity
including the credit guarantees and liquidity assistance to small to medium enterprises. In
Abu Dhabi the government has announced a reduction or suspension of various government
fees and penalties, also has it announced a reshape on the lease payments of the commercial
sectors like tourism and hospitality.
Answer to question 2:
Identifying the reasons behind the emergence of Green GDP terminology:
The traditional performance measurement was done by the parameter called Gross
domestic product which keeps a count of the economic development. However, it does not
give an accurate measurement human and environmental well-being. Therefore a better
attempt in order to provide an accurate accounting measurement and record called the Green
GDP was proposed in the 1990 which gives a more positive transaction that benefits the well-

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being and reduces the negative economic activities. In the recent years, the concept of Green
economy has gained prominence and currency to a very large extent as it provides a response
to a number of crisis faced globally the crisis includes such as the climate, food and economic
crisis. It provides an alternative promise to the growth with environmental protection and
reducing poverty. The term green GDP has no specific and unique definition however right
from the word itself one can make out that it implies to the economic dimensions of
sustainability or, in terms of the recent UNEP report on the Green Economy, it responds to
the increasing growth in the recognition that achieving sustainability rests almost entirely on
getting the economy right. Where GDP can simply be defined as the total market value of the
final goods and services produced with the territory in a specified time period also including
the exporting goods. Also, it has been used as a standard measure of the economic size in
national accounting which is mistakenly regarded as a proxy for progress in the public
disclosure. However there are certain traditional limits like climate regulation, carbon
sequestration, and nutrient cycling, while indispensable for human survival, are not part of
traditional economic accounting which are faced by GDP. It also omits significant goods and
services that is obtained from nature because of its scope limitation by the market. It has
become a target of criticism in the recent decades, because of exclusion of the exclusion of
certain activities that contribute to the well-being. However, the concept of Green GDP is
gaining prominence as it serves as an effective economic indicator of the urban
environmental management which is gaining international attention. In the concept of Green
GDP, it focuses on new economic growth paradigm which is eco-friendly and
environmentally safe.
As a concern arising in many countries, the concept of green economy is consistent
with broader and older concept of sustainable development. That is, the concept must be
holistic in nature by emphasizing on three most significant pillars of development that is

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economic, social and environmental with a focus on the inter-generational equity. According
to the UNEP, a green economy is the one that brings about improvement in the human well-
being with social equity in which there are minimum risks associated with the environment.
In this concept Khor points out several concerns which are associated with this transition
from GDP to Green GDP mostly in all the developing countries across the world like the
identification and deal with trade off that might be involved at various stages of
environmental promotion and challenges.
Implication of low green GDP and its calculation:
Green GDP reflects the tradeoff between the economic system and ecosystem and the
lower value of green GDP implies that the economy is not resource efficient when it comes to
greening it and there is no low emission and lower value of green GDP imply low societal
and economic wellbeing. Green GDP is the measurement of the economic growth in
comparison to the harmfulness to the environment. It is calculated by subtracting the
environmental costs and the damage to the economy in a specified time period from the real
GDP. The major problem faced in green GDP calculation is in solving the economic growth
price is in terms of life quality within that area. For an instance, if an industry has excellent
production schedule it will definitely add to the growth of the economy, however the damage
done by the industrial affluent and effluents will eventually result in levelling up the
environmental damage. Hence, Green GDP subtracts the environmental damage cost like cost
covered up in the depletion of the resources including land, forests, minerals, water and
others. Additionally, the Green GDP also takes into account the monetary damage done in
terms of pollution. It is however difficult to put them into numbers which brings about a more
approximation to the exact calculation.

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Comparing the value of green GDP and real GDP:
In this framework, it is in match with the older concept of sustainable development
mainstreamed in the United States for the past ten years, also for the developing countries
like India where the economic development gets more demanding it entails the challenges
associated with it. There are risks and challenges, related to it in terms of reinforcement of
protectionist trends and the enhancement of the conditionality related with the international
financial cooperation. In the year 2009, at the UNCSD’s preparatory committee the delegates
had proposed a query to United Nations Department of Economic and Social Affairs, the
United Nations Environment Programme, the United Nations Conference on Trade and
Development to both the merits and demerits which are associated with the adoption of the
Green GDP.
In India, the Gross Domestic Product expanded nearly around 4.7 percent in
December followed with a growth 0f 5.1 percent in the previous quarter. As evident, from the
data of from Jun 2005 to Dec 2019, the real GDP growth is updated on an average rate of 7.5
percent with a highest record of nearly 13 percent and the lowest of 0.2 percent in the March
month. As calculated by CEIC, the real GDP Growth from the quarterly real GDP, the real
GDP based on SNA 2008 provided by central statistics office in the local currency in
between 2011-2012 prices. For the Green GDP goals set for India, it failed to meet its target
as revealed from the economic valuation of six of its reserves.
The depletion rate of natural resources of India has been increasing until 2008 and it
lowered in the coming years that is 2011, 2012 and 2013. There has been increase in the
slower rate of depletion and any positive changes in the figures is implication of the fact that
the citizens are exploiting more and more resources. Per capita use of energy on annual basis
in year 2000 was 438 kgs and this has been growing continuously and is recorded at 679 kgs
per capita in year 2019. The overall picture of the repletion of the natural resources is

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recorded at the compound growth rate of 3%. It has been found that in year 2015, the growth
of population has been less than the growth of renewable electricity. The reason is
attributable to the industrial and technological development in the country. Furthermore,
there has been increase in per capital of renewable energy and this implies that renewable
electricity performance in the country is increasing.
Green growth could be a reality for India, if it adopts the measures to reduce the
degradation of environment at the minimal cost of 0.02% to 0.04% of the average annual
gross domestic product. It will assist India in maintaining the economic growth without
jeopardizing the environmental sustainability.
Answer to question 3:
Identifying the reasons for increasing unemployment rate amongst youth:
Youth unemployment has become one of the challenging problem across the countries
where most of the youth a country has either unemployed or underemployed which
consequently impacts the overall development of the world economy. It can be stated
according to a survey that unemployment is the total number of the people in the labor market
who are jobless and are seeking one but cannot find suitable one for themselves in the labor
market which is approximately at 5.2 percent of the labor force. Youth unemployment can be
defined as a situation, where the young generation keep looking for a suitable job but
eventually either due to lack of proper returns are rendered jobless and youth employment is
a matter of serious concern. An unemployed person can be categorized as someone who does
not hold a job and is actively looking for one. For a person to qualify as unemployed for
official and statistical measurement, the person should be without a job, however willing to

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work and able to work, of the designated working of the mid 60s and seeking a position
where he/she can best utilizes his/her skill and degree. It can be said that the rate of
unemployment tends to higher than the rate of adults in every country across the world.
There are several reason which can result in unemployment among the youths
globally. The primary factor behind unemployment, is the quality and the relevance of
education. In the year of 2010, 25 out of 27 countries, the rate of unemployment was
maximum among the people with primary education or less than that. So, it can be said that
education cannot assure a person with a decent job. Females are effected by unemployment in
particular because at times even after pursuing a higher degree of education comes the
drawback of the field jobs where most of the time males are the preferred candidates. For
instance, in countries like Turkey, the rate of unemployment among the educated women is
more than 3 times than that of the university educated men. Followed by the countries in the
Middle East, where the rate of female unemployment is leading and is nearly 8 times than
that of men in the country. Moreover, beyond the requirement to assure to all, education is
not adequately made up to fulfill the needs of the demanding labor market, which
consequently results in the joblessness among the youths apart from the inability of the
employers to hire them for the skill which they look for in them. The lack of sufficient job
creation and the crisis in the economy has resulted in increase of unemployment. According,
the survey the 55 percent of the total employers face skill crisis among the youths, as the
businesses experience a incompatibility in between the skill and the learning among the
students through the education system and what is actually needed in work place. That is, the
major factor that can bridge this gap is improve the education system, so that it becomes
easier for the employers to hire the proper match of skill required for the company.
Apart from this crisis of skill among the youth population there are several other
reasons unemployment among the youth like labor market and regulations and assistance and