US vs. Saudi Arabia
Inflation
Inflation rates play a critical role in determining an economy’s health. According to the U.S. Labor Department, the inflation for the last twelve months ended June 2017 was 1.6%. In March 2017, the monthly inflation rate was 0.08%. The country recorded 2.1%, 1.5%, 1.6%, 0.1% and 1.3% inflation rates in 2012, 2013, 2014, 2015 and 2016 respectively. The inflation rate is calculated on the basis of Consumer Price Index (CPI). CPI is inclusive of prices that consumers pay for the products including producer prices and a number of taxes.
Saudi Arabia’s inflation rate in June 2017 averaged 3.8%. The country recorded 2.86%, 3.51%, 2.69%, 2.19% and 3.51% inflation rates in 2012, 2013, 2014, 2015 and 2016 respectively. In Saudi Arabia, Consumer prices fell 0.4% year-on-year in June 2017. Consumer prices in decreased 0.2% in May compared to an increase of 0.1% in March. The decline is associated with lower prices for machinery, metal products, equipments as well as rubber and basic chemicals. The most important categories in the CPI in Saudi Arabia are beverages and foodstuffs (US Bureau of Economic Analysis, 2017).
Unemployment
United State’s unemployment rate in June 2017 stood at 4.40%. The country recorded a 4.30% unemployment rate in May of 2017. The average unemployment rate from 1948 to 2017 is 5.8%. The rate reached an all time high of 10.80% in November of 1982 and hit a record low of 2.50% in May 1953 Saudi Arabia recorded an Unemployment Rate of 5.60% in January 2017. The average unemployment rate from1999 to 2016 were 6.30%.
GDP (dollar amount and per capita)
United States GDP was worth 18569.10 billion US dollars in 2016. The value represents approximately 30% of the world economy. The average GDP for the years 1960 to 2016 is 6770.94 USD Billion. The country recorded the highest GDP in 2016 and the lowest in 1960. Saudi Arabia’s GDP was worth 646.44 billion US dollars in 2016. The country’s GDP is equivalent to 1.04% of world economy. It recorded an average GDP of 223.63 USD Billion from 1968 to 2016. The highest GDP was recorded in 2014 amounting to 756.35 USD Billion while the lowest was recorded in 1968 amounting to 4.19 USD Billion (World Bank group, 2017).
Components of exports/imports (dollar amounts and major exports/major imports)
In 2016, trade between the United States and other countries amounted to $4.9 trillion. The amount comprises of $2.7 trillion in imports and $2.2 trillion in exports of both goods and services. As a result, the United States was the second-largest largest importer after the European Union and third-largest exporter, after China and the EU. Goods comprise of more than two-thirds of the country’s exports. Capital goods make up a third of exported goods. Capital goods include commercial aircraft, industrial telecommunications, semiconductors, medical equipment and Electric apparatus. Saudi Arabia’s total value of trade in 2015 amounted to 163821 million US dollars. The amount comprises of $2,306,822 million in imports and $1,503,870 million in exports of both goods and services. Trade comprised of 28% of the country’s GDP.
Interest rates (10-yr bond)
It recorded the lowest interest rate at 1.50% in March of 2004. Currently, the United State’s US 10-Year Government Bond Interest Rate is at 2.19%. This is a decrease from 2.30% in June and 1.64% last year. The long term average stands at 6.37%. Saudi Arabian repo rate was steady at 2% on June 15th, 2017 (Economic research, 2017). The Federal Reserve has increased rates two times this year. The average interest rate from 1192 to 2016 is 3.79%. The country recorded the highest interest rate in May 2000 at 7%.
National debt (dollar amount and percent of GDP)
By March 2017, the U.S. debt amounted to approximately $19.9 trillion and is constantly changing. The total government debt is expected to amount to $23.4 trillion at the end this year. On the other hand, Saudi Arabia’s government debt for the year 2016 amounted to 13.10 % of the country’s Gross Domestic Product. The decrease in government revenues associated with high oil prices over the last decade has led to a budget shortfall. This has forced the government to increase its borrowing.
Currency (name and exchange rate)
The Saudi Arabian’s Riyal averages 0.266558 US dollars for the month of July 2017. The United States Dollar exchanged at an average rate of 3.75 SAR for the same period (US Bureau of Economic Analysis, 2017).
Central bank
In the United States, The central banking system is known as the Federal Reserve System. The Federal Reserve operates by regulating the amount that financial institutions maintain in their accounts held by Federal Reserve Banks. Saudi Arabia’s central bank is the central monetary authority in the country (World Bank group, 2017).
Policies for economic growth
While U.S. economy is still the largest in the world; it is facing challenges at the domestic level. The country attempts to achieve growth through using more resources and increasing output derived from each resource. Other policies are focused on impacting the unemployment levels and improving investment in growing sectors. This has been done through the regulation of interest rates on borrowed finances.
The economic policies implemented by Saudi Arabia focus on achieving growth and economic diversification. These include objectives to enhance economic resilience, increase structural reforms and preserve macroeconomic stability. Programs implemented to achieve these objectives promote reforms to improve business environment, increase private sector’s participation in the economy and bolster job creation. These programs are such as the Fiscal balance program, National Transformation program, Human capital program, Program for strengthening public sector governance and the privatization program.
Fiscal policies
United State’s markets have responded strongly to presidential elections. This has pushed up the dollar, longer-term interest rates and equities. The expectations of a more expansionary fiscal policy under the new president’ administration characterized by lower taxes, higher spending and larger deficits is a critical driver of the prevailing market conditions (US Bureau of Economic Analysis, 2017). Saudi Arabia is tightening its fiscal policies in order to achieve a balanced budget by the year 2020. One of the measures expected to be put in place is gradually increasing energy prices. The fiscal policies are in reaction to expected recession in 2017, oil production declines and slow amid fiscal consolidation.
Monetary policies
The United States uses Federal Reserve uses discount rates, reserve requirements and open market operations as the major monetary policy. Currently, the Federal Reserve’s Open Market Committee has left the Federal Funds rate at a range of between 0.50% and 0.75%. On the other hand, the United Arab Emirates employs an active expansionary monetary policy to achieve low unemployment, high and sustained economic growth and stable prices. Other monetary policies employed by both governments include issuance of government bonds and major monetary policies.
References
Economic research (2017) Federal Debt: Total Public Debt as Percent of Gross Domestic Product.
US Bureau of Economic Analysis (2017) the United States of America.
World Bank group (2017) United States of America.
World Bank group (2017). The Saudi Arabia.
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