Global Economy, National Economies, and Competition
Various economic factors have been studied because of their influence on economic growth. While there are numerous economic factors that influence a country’s economy, the most studied factors include the GDP, inflation and unemployment rates. This essay will involve a macro analysis of two countries: the USA and Kuwait. The analysis will be on the major economic indicators for the last 5 years: gross domestic product, gross national product, rate of inflation, interest rates, unemployment rate and type of unemployment, national debt, total export and import of each country, bilateral export and import between the two countries.
The following table summarizes the major economic indicators for the last 5 years for the two countries:
|Gross domestic product (in billions)||$18,569 b||$110.876 b||$18,037 b||$114.567b||$17,393 b||$162.632 b||$16,692 b||$174.161 b||$16,155 b||$174.07 b|
|Gross national product||$19,134||$34,890||$18,504||$40,750||$17,253||$49,770||$16,702||$51,990||$16,225||$49,950|
|Rate of inflation||2.1||3.2||0.7||3.3||0.7||2.9||1.5||2.7||1.8||2.9|
|Type of unemployment||Structural||Structural||Structural||Structural||Structural||Structural||Structural||Structural||Structural||Structural|
|National debt (% of GDP)||108||32.0||105||32.0||104||21.4||104||20.8||102||17.2|
|Total export (in billions)||$1454.6||$46.7||$1504.9||$55.1||$1623.3||$106||$1578.9||$115||$1547.1||$120|
|Total import (in billions)||$3643.6||$26.1||$2241.1||$27.2||$2345.8||$27.3||$2267.6||$25.4||$2275||$24.2|
|Bilateral export||$3.3b||$3.3 b||$2.74 b||$4.68 b||$3.65 b||$11.44 b||$2.59 b||&12.63 b||$2.68 b||$13.02 b|
|Bilateral import||$3.3 b||$3.3 b||$4.68 b||$2.74 b||$11.44 b||$3.65 b||$12.63 b||$2.59 b||$13.02 b||$2.68 b|
Table 1. All the values presented are in obtained from The World Bank.
The gross domestic product (GDP) of the USA is way above that of Kuwait; whereas US GDP has stood at an average of $17,434 billion for the past five years, the GDP of Kuwait has been at an average of $152.6 billion. However, the GDP for Kuwait has been steadily decreasing since 2012 and this might be due to high dependency on the movements or stability of oil prices (CBK, 2013). Compared to the US, Kuwait also does not have much public investment in the economy. The lower GDP in Kuwait might also be explained by the country’s failure to diversify its economy and heavily relying on oil exports. The institutions in the US are also stronger than those in Kuwait (Goridko & Nizhegorodtsev, 2016).
In terms of gross national product (GNP), Kuwait has had a higher value of GNP than the USA for the past five years. The higher GNP in Kuwait could be due to a smaller population and a strong petroleum based economy. There is also little investment in other areas of the economy in Kuwait. However, the GNP for the USA has been steadily growing for the past five years while that of Kuwait has been shrinking every year. This might be due to political factors as well as the depletion of natural resources.
Comparing the two countries, the rate of inflation in Kuwait has been slightly higher in Kuwait. The higher inflation rate in Kuwait could be as a result of the inflation rate of its trading partners, foreign exchange rate and domestic money supply. For instance, political developments in the past five years might have been one of the domestic factors affecting inflation rates in Kuwait (Khamis, Mohd & Muhammad, 2015). However, the inflation rates in Kuwait have remained stable under 3.3% for the past five years because the GCC region is known to help its member countries including Kuwait to moderate inflation, particularly when oil prices rise. The lower inflation rates in the US might be due to stronger exchange rates and increased exports and reduced imports.
The interest rates for Kuwait have been higher at an average of 2.25 for the past five years while the interest rates of the USA have remained below 0.75. The higher interest rates in Kuwait might be explained by higher inflation rates, wage inflation and rates of unemployment (Husain, 2007). Increased imports as well as the foreign exchange rate might also have caused the interest rates to remain above 2.00 in Kuwait for the past five years. In the US, the low interest rates can be explained by increased exports and lower unemployment rates.
The unemployment rate in the US is slightly higher compared to Kuwait. This could be because of a higher population in the US; however, the unemployment rates in the US have been steadily reducing since 2012 and this could be due to the growth of both the public and private sectors. The higher unemployment rates in 2012 could be as a result of the economic recession and skills becoming irrelevant. In contrast, the unemployment rates have remained steady for the past five years possibly due to the economic stability of the country. In Kuwait, the unemployment rates a relatively low and the unemployed population is mostly made up of people who refuse to work in the private sector. The type of unemployment for both countries seems to be structural.
The national debt for both countries seems to increasing for both countries for the past five years. However, the US has a bigger debt than Kuwait mainly because of its increased budget for the past 10 years. The US government has been spending way above its revenue and to cover this deficit, it has been borrowing locally and from other countries in China. Other factors that have contributed to the US debt burden are economic stimulus package, military activity, as well as tax cuts. The lower national debt in Kuwait might be explained by the country’s history and culture of repaying debt (Xu, Kim & Moussawi, 2016).
In terms of exports and imports, the US imports more than it exports. In addition, total imports have been steadily increasing since 2012 and this implies that the country is opting for exports rather than supporting local industries. For Kuwait, the value of imports has been steady but the exports have no specific pattern. Kuwait also has more exports than imports and this could be explained by the huge oil exports from the country every year. Bilateral export and import between the two countries has also been steady for the past five years with 2016 seeing a balance between the bilateral imports and exports.