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No major setback seen if Qatar loses World Cup

London, August 17, 2014

The potential economic cost Qatar will suffer if it were to be stripped of the World Cup hosting rights will  comprise some short-term pain including a 20 per cent fall in equities, according to a new report from Credit Suisse.

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 seven 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 build-up in inflationary pressures,” the bank says. – TradeArabia News Service




Tags: Qatar | equities | Word Cup |

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