As the global football competition continues, which nations have the advantage economically?
by Bethan Rees
The 2018 FIFA World Cup has people around the globe transfixed on their television screens. Along with the crowds cheering for goals and sad fans mourning a defeat, the World Cup also has an effect on national economies, whether it’s the hosting country, or the nation of a participating team. Australian broadcaster SBS News reports that Mikhail Delyagin, an economic adviser in the administration of former Russian leader Boris Yeltsin, says it will be a “new chapter” for Russia.
Russia is reported to have spent approximately RUB700bn in preparation for hosting the World Cup, with costs going towards transport infrastructure, stadium construction and accommodation. SBS News says the budget for the tournament was modified 12 times. From further research it appears the Russian government originally earmarked a budget of RUB678bn, which was later reduced to approximately RUB665bn and changed multiple times in the run up to the tournament. It is now thought to be the most expensive World Cup ever.
President Vladimir Putin has “vowed the spending will pay off”, though.
But, according to SBS News, a report published by Moody’s Investor Service disagrees with Putin, and argues that the World Cup will have short-lived effects.
Delyagin opposes the report. “If you look at small business expenses, what was invested in stadiums and infrastructure and how much beer will be drunk in the bars, then it won’t cover the costs,” he says. “But if you look at the long-term benefits of new roads, new infrastructure and new tax dividends for business, then yes it will.”
Delyagin points out that life in Moscow hasn’t changed due to the World Cup, but it’s a different story for surrounding areas. “In Saransk, for example, it’s a completely new chapter in the city’s life that will carry on after the World Cup is over. While in Rostov-on-Don, they’ve built a beautiful new airport,” he says.
SBS News article
A match loss could cost billionsWhile it might be more obvious to see the economic implications of the World Cup on the hosting country, a loss for a participating team could also affect that team’s home stock market, as
The Financial reports.
Alex Edmans, professor of finance at London Business School, has some observations on this, which stem from his own research for a 2007 paper titled
Sport sentiment and stock returns.
He claims that World Cup performance has an effect on financial market activity.
“Sport is an emotional topic for millions of people, including professional and personal investors. Their trading decisions are affected by mood, so the performance of a national team in an international competition can have major financial repercussions that reach far beyond the playing field,” Edmans says.
According to the article, his paper finds evidence that billions of pounds could disappear from a stock market following the loss of a national team at an international-level sporting competition due to emotional turmoil. He measured this by analysing 1,100 football matches and stock markets in 39 countries.
The research shows “a loss in an elimination match of the football World Cup triggers a 0.5% fall in the country’s national market the next day,” Edmans says.
Using this theory, a loss by the England team in the Russian tournament has the potential to remove £12bn from the UK stock markets.
The research also finds that the more prestigious the competition, the more impact a loss for a national team would have on the financial markets.
However, a win for a national team does not result in the improvement of the country’s financial market performance, Edmans adds. “This might be because fans overestimate their team’s ability and so a win comes as less of a surprise than a loss.
“A win simply sends a side through to the next round, but a loss can mean the end of the team’s competition.”
The Financial article
Egypt’s campaign backed by the World Cup A country that has qualified in the World Cup might see the value in using this opportunity to boost its own economy, through a campaign for tourism and foreign investment. The ASANmed network reports that Egypt is doing just that.
“This is the first World Cup for which Egypt has qualified since Italy 1990 and we want to make the most of this opportunity to show in a modern way the richness and diversity of tourism experiences in our country'', says Egypt’s tourism minister Rania Al-Mashat.
During Egypt’s match against Russia on 19 June, advertisements were placed in the stadium and a series of hashtags were launched on social networks, including #thisisEgypt and #investinEgypt. The tourism ministry also launched a
website for the occasion.
The Egyptian minister for investments and international cooperation, Sahar Nasr, says that being an official supporter of the World Cup “gives [Egypt] the possibility of promoting [itself] and communicating the great diversity of possible investments and the potential Egypt has to offer”.
Despite the negative short-term effects that crashing out of the World Cup might have on a country’s economy, participating nations are likely to see the positive long-term impact of infrastructure development, foreign investment and increased tourism as being worth the wait.
ANSAmed article
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