- A computer generated image shows the stadium to be built in Al-Khor for Qatar’s 2022 World Cup.
- Agence France-Presse/Getty Images
It hasn’t exactly been smooth sailing for Qatar since it started preparations to host the World Cup football in 2022. Ever since the wealthy Gulf state won the rights to host the tournament in 2010, it has been the subject of bribery allegations while at the same time criticism has mounted over the way the country treats its foreign labor force.
Big banks such as Bank of America Merrill Lynch and Credit Suisse are now weighing in on the debate as they measure the potential economic cost if Qatar were to be stripped of the World Cup hosting rights.
Credit Suisse in a new report predicts Qatar will inevitably suffer some short-term pain: equities could fall 20% should Qatar lose the rights to host the marquee sports event. That drop, however, could provide bargain hunters with an ideal buying opportunity, it says.
In the grand scheme of things, losing the World Cup shouldn’t derail the country’s economic growth trajectory, the Swiss-based bank argues. Qatar plans to spend $212 billion in the next 7 years to build the football stadiums but also a rail network, metro line, housing and even a new city. Even without the tournament, most of these investments will likely go ahead though there’s a risk that project delays could cloud Qatar’s expenditure outlook.
Credit Suisse is also far from convinced that a one-off event such as the World Cup has a lasting economic impact, citing data from recent tournaments which show that tourism numbers are not always sustained after the football fans go home. In Brazil’s case, for example, the country’s investments related to the World Cup and upcoming Summer Olympics couldn’t prevent a slowdown in gross domestic product growth.
“History suggests that while such events promote growth and employment in the tourism and hospitality industries, the benefits are not translated into sustained economic growth unless it is supported by a long-term strategy for the improvement in infrastructure that directly benefits the economy and its residents,” it says.
If the World Cup project goes ahead, as Credit Suisse predicts it will, there are a number of obvious sectors that stand to benefit the most from the country’s lavish spending plans: petrochemicals, cement and infrastructure followed by real estate, healthcare, education and utilities. In addition, World Cup-related spending should underpin credit growth and corporate earnings in Qatar.
Still, concerns are likely to linger until 2022, Credit Suisse warns. Questions will remain over the timing of the event – whether it should be moved to the winter to avoid the stifling summer temperatures – and the potential overcapacity the infrastructure spending will cause.
“Over the medium term, there will be concerns related to the potential cost overruns (which have been considerable for previous hosts), not to mention the potential for a substantial buildup in inflationary pressures,” the bank says.
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(via WSJ Blogs)