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The economic impact of the Qatar FIFA World Cup

The 2022 Football World Cup that kicks off in November will provide a significant boost to Qatar’s economy in Q4, but we doubt that the economic legacy of the tournament will live up to officials’ expectations. That raises the risk of overcapacity in key sectors and strains in the banking sector.
  • The 2022 Football World Cup that kicks off in November will provide a significant boost to Qatar’s economy in Q4, but we doubt that the economic legacy of the tournament will live up to officials’ expectations. That raises the risk of overcapacity in key sectors and strains in the banking sector.
  • The tournament in Qatar, the first in the Middle East, begins on 20th November. On the pitch, Qatar’s fortunes don’t bode well – betting odds imply that the hosts have a 0.3% chance of lifting the Jules Rimet trophy. But the country could fare better off the pitch via the economic boost. The benefits accrue through two main channels: increased investment and greater consumer spending, particularly by tourists.
  • With regards to the first channel, officials said in October last year that total government spending for the tournament was equal to $200bn, of which $6.5bn was estimated to have been spent on building the eight stadia for the tournament. While the government has said much of this infrastructure spending would have occurred regardless of the tournament, the $200bn – which is equivalent to almost 10% of GDP per annum since the bid was won – is astronomical compared with previous World Cups. (See Chart 1.)
  • That said, much of the boost to GDP growth from investment related to the tournament has already happened. The construction of the majority of the stadia and surrounding infrastructure was completed by 2019. That helped to support GDP growth in the non-hydrocarbon sector, which averaged 5.3% between 2010 (when Qatar won the bid to host the World Cup) and 2019. But growth was slowing towards the end of that period and, crucially, this boost from tournament-related investment will not be repeated.
  • The major boost during the tournament will be from tourism spending, since any extra spending by locals is likely to be brought forward from future months. Ticket sales suggest that around 1.5mn tourists will visit for the World Cup. If we assume each visitor stays for ten days and spends $500 a day, spending per visitor would amount to $5,000. Hence, total additional tourist spending would be around $7.5bn – this is equal to around 6% of non-hydrocarbon GDP.
  • As a result, we think that the World Cup will provide a significant boost to Qatar’s economy in the final quarter of this year. Compared with previous World Cups, our forecast of GDP growth of around 4% q/q in Q4 represents a much bigger boost. (See Chart 2.) A key reason for this is simply that Qatar’s economy is just a fifth of the average size of those countries that have hosted a World Cup since 1990.
  • That said, we are doubtful the tournament will leave a lasting benefit for Qatar’s economy. The government targeted 6m tourist arrivals by 2030. Even with the one-off boost of 1.5m visitors, Qatar would hit 4.5-5.0m tourists this year, some way short of that target (its previous peak, in 2016, was 2.9m visitors). We are doubtful that the government’s target will be achieved which, given the vast supply added to the hospitality sector in recent years in the run-up to the World Cup, means that overcapacity is likely to mount.
  • This is a concern given that a large share of bank lending was directed toward hospitality and tourism sectors in the previous decade. In turn, if revenues are weaker than expected, it may impact firms’ capacity to service debts and lead to a rise in bad loans on banks’ balance sheets. Admittedly, banks are well capitalised with tier 1 capital ratios of 17.5% (well above the 8% minimum). But, higher default rates are likely to lead to a tightening of domestic credit conditions– something we have long warned about.

Chart 1: Average Government Investment for World Cup per Annum (% of GDP)

Chart 2: GDP
(% q/q, SA, t = quarter in which World Cup is hosted)

Sources: Various, Refinitiv

Sources: CEIC, Refinitiv, Capital Economics


James Swanston, Middle East and North Africa Economist, +44 (0)20 7808 4991, james.swanston@capitaleconomics.com

James Swanston Middle East and North Africa Economist
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