By Santhosh V. Perumal
Business Reporter

Qatar’s “solid and strong” macroeconomic policy initiative to diversify its hydrocarbon-rich economy has come in for praise from the International Monetary Fund (IMF), which on Tuesday termed the current trough in oil prices as a “wake-up call” for the Gulf region to initiate measures to strengthen the economies.

Highlighting the low oil prices, which are expected to remain firm at the level for foreseeable future, as one of the main concerns for the oil producing economies, notably the Gulf Cooperation Council (GCC); IMF managing director Christine Lagarde said “as far as Qatar, there have been solid and strong policy measures to diversify the economy.”

The Ministry of Development Planning and Statistics, in iis Qatar Economic Outlook for 2015-17, had said non-hydrocarbon sector will continue to account for most of the economy’s expansion.

Non-hydrocarbons contributed 62% of the real gross domestic product (GDP) in 2014; while the remaining 38% was from the hydrocarbon sector, according to MDPS.

Moreover, non-hydrocarbon sector is expected to grow faster than the hydrocarbons during the review period.

“A non-oil GDP growth of more than 10% is impressive,” Lagarde said, addressing a seminar ‘Global Transitions: Implications for the GCC Region’, organised by Georgetown University Qatar.

Terming the current situation of low oil prices as an “excellent wake-up call” for those economies dependent on a single blessing of nature, she said the large financial buffers that have been built up will to a certain extent shield the economies from taking any sudden or disruptive fiscal policy changes.

Although the size and urgency of this change varies across the economies, Lagarde suggested that the Gulf direct the spending where it is necessary and also to bring in private sector more to the fore by integrating it to the national economies.

“(The policy of) anything that is totally free has to be revisited,” she said in reference to the utilities as water, which is limited and scarce. Moreover, the subsidies on fossil fuels need to be reexamined across the board, she added.

On Iran, when sanctions are lifted, there will be an impact on the world economic order in both supply and demand sides, she said.

On the supply side, additional barrels of oil will come into the market, which will have an impact; while on the demand side, the Iranian market has appetite for larger imports of products.

“Yes on both sides of equilibrium, there will be an impact,” she said in a reply to a question whether the opening of Iran will have its ramification in the world economy in general and GCC in particular.

In her opening remarks, Lagarde said the world economy was “fragile and uneven” with incomplete transition.

The global economic growth of 3.1% this year (down from 3.4% in 2014) do not respond to the needs, she said, highlighting that 200mn more people will enter the job market, thus making the growth “fragile”.