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Russia’s $11bn World Cup not likely to impact economy – Analysts

by Anthony Nlebem

June 8, 2018 | 8:37 am
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As the much-anticipated biggest football tournament kicks off on Thursday June 14th, Russian soccer fans are not holding out much hope that their national team will emerge victorious the 2018 FIFA World Cup. Russia’s economy might not be a big winner either, according to Moody’s Investors Service.

The economic benefit of hosting the world’s most-watched sporting event will be very limited and short-lived, analysts from the rating company said in a report published recently. “The impact is likely to be even lower” than the 2014 Winter Olympics hosted by Russia in Sochi, “which developed an under-built resort area that is more accessible than many of the regions where the World Cup will be staged.”

The World Cup is taking place in Russia for the first time and matches will take place in 11 cities including Kaliningrad in the west, Volgograd in the south and Yekaterinburg in the Urals. In most areas, visiting fans will give a boost to nominal gross regional product of only around 1 percent to 2 percent, and the World Cup effect won’t exceed 3 percent in any region this year, according to Moody’s.

After winning the right to host the month-long tournament in 2010, Russia spent 683 billion rubles ($11 billion) on preparations for the World Cup from 2013 to 2018, much of it on new stadiums and transport infrastructure. While that’s only a fraction of the estimated 1.5 trillion rubles Russia spent to prepare for the Sochi Olympics, the spending boosted gross domestic product by about 1 percentage point during those six years, according to the Russia 2018 World Cup Organizing Committee.

The investment in the soccer tournament will add between 150 billion and 210 billion rubles annually to the economy over the next five years, the committee estimates.

“The associated economic stimulus will pale” in comparison to Russia’s $1.3 trillion economy, with much of the macroeconomic impact already felt through infrastructure spending, according to the Moody’s report.

While preparations for the World Cup helped host regions to improve their infrastructure, it won’t boost long-term growth because sectors benefiting from tourism including hotels, trade and transport “are not drivers” in most of the local economies, Moody’s said. They are unlikely to draw tourists over time as “the regions’ remoteness, climate, and availability of alternative destinations will limit the tourism industry’s long-term growth potential.”

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by Anthony Nlebem

June 8, 2018 | 8:37 am
  |     |     |   Start Conversation

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