World Cup Economic Impact

World Cup Economic Impact

World Cup Economic Impact : Does the World Cup Have a Lasting Positive Impact on Hosting Countries?

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When a particular country is chosen to host the World Cup, its leaders are usually seen in celebration with beaming smiles. While some say that the excitement is due to their love for football, others suggest that they are excited about the numerous economic opportunities that come with hosting a World Cup.

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While these opportunities seem to be everlasting, many hosting countries have realized that the expected boom in their economy doesn’t last as long as they had expected.

Because the host is announced eight years prior to the actual event, the majority of investments are secured years before the World Cup.

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This has been proven by the World Cup’s most recent host, Russia. Kristin Lindow, a senior Vice President at Moody’s, explained that much of the economic impact is already felt through infrastructure spending in the 5-6 years before the World Cup (2013-2017 in Russia’s case).

The cost of building and improving infrastructure, paying construction workers, and hiring security cut deeply into the revenue made over the course of the World Cup.

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In 2014, international economic forecasters projected that Brazil would earn over three billion dollars from hosting the World Cup. Instead, Brazil ended up losing over eleven billion dollars, and ended up spending roughly four billion dollars building and maintaining stadiums, three times the original estimate.

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Hosting countries also believe that they can profit significantly because they anticipate an increase in tourism within their borders.

This could also be a fallacy, as seen when China and the United Kingdom hosted the Olympic games.

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The World Economic Forum found that yearly visits in the two countries “decreased in their Olympic years, while the UK’s most popular museum, the British Museum, saw 22% fewer visitors during the month that the games were held.” This was confusing to many, as the decline in tourists at the main attractions was the opposite of what people expected.

The British government discovered that the Olympic Games deterred the usual amount of tourists that came to their country. The British Government’s official statement suggested that this was due to “the potential for overcrowding, disruption and price rises.”

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On the other hand, the 2018 World Cup in Russia has been comparatively successful.

While Russia spent around $15 billion in preparation for the tournament, it has made $14.5 billion of it back, equivalent to roughly 1.1% of the country’s GDP.

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Despite the fact that the soccer stadiums that Russia spent $3 billion on will not be very useful, the money that Russia spent on infrastructure will likely help grow the Russian economy in the future.

However, just days after Russia’s World Cup concluded their 45,000 seat Volgograd Arena started to crumble from heavy rains.

While the World Cup has not been economically beneficial to many countries such as Brazil, time will tell whether the World Cup has a lasting positive impact on the Russian Economy.

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Written by Robert Malzberg, Edited by Lorenzo Lizzeri & Alexander Fleiss

Sources

https://www.cnbc.com/2018/06/14/russia-world-cup-will-give-economy-a-boost.html [1]

http://www.economywatch.com/features/economic-impact-brazil-world-cup.16-06.html [2]

https://www.weforum.org/agenda/2018/06/world-cup-football-smart-investment-russia-host/ [3]