Will the World Cup bring home an economic win for Qatar?

The 2022 World Cup is marked by superlatives. It is the first time the global football tournament takes place in a Gulf nation. Qatar is the smallest country ever to host the month-long event. This year’s World Cup is also the most expensive—at least 20 times more pricey than past tournaments. Finally, the competition is arguably the most controversial in the Cup’s history, calling into question how Qatar will be rewarded for spending the historical sum.

Qatar has a population shy of 3 million people, only around 300,000 of whom are permanent residents. The country gained independence in 1971, and by the mid-2000’s it became the world’s top LNG exporter, catapulting its development. The government now boasts a sovereign wealth fund worth USD 450 billion and one of the highest GDPs per capita in the world.

The country has shelled out an estimated USD 220 billion, roughly 100% of GDP, since winning the bid in 2010. These funds were used to construct seven new stadiums, refurbish one older stadium, and create a new metro system linking these venues. Other huge infrastructure investments included upgrading an old airport, building hundreds of hotels and upgrading significant portions of the country’s roads.

Over one million tourists are expected to fill these new structures over the next month, providing a near-term boon to the economy—especially thanks to increased spending on food and hospitality supporting services. Increased domestic demand will also drive inflation up; our Consensus Forecast expects inflation to more than double from 2021’s figure and average 4.6% in 2022, well above the GCC average.
 
Several factors limit how much revenue Qatar will reap from the Cup, however. FIFA will take home much of the profit generated during the games by selling its own products. Furthermore, host countries must give tax breaks on merchandise, food and other purchases from FIFA and its partner brands, limiting the boost to government coffers. Overall, official estimates are that the World Cup will generate USD 17 billion for the Qatari economy while it takes place.

After the spectators depart, the significant investment in infrastructure may leave Qatar with mammoth structures that it has little use for, potentially creating oversupply in the hotel and real estate sectors. This wouldn’t be the first time a World Cup leaves such a legacy; one of the most expensive stadiums ever built for Brazil’s 2014 tournament was used as a bus depot shortly after the competition concluded.

The soft power gains Qatar can expect from hosting the World Cup are more complex to quantify than the costs. On one hand, the extensive negative press that the event has been getting—with some European cities avoiding broadcasting the games in public—could sour relations between Qatar and the West. On the other hand, the Cup may go some way towards strengthening regional ties—important given the 2017 diplomatic rift between Qatar and other GCC member states—as neighbors benefit from the Cup. For instance, the UAE is seeing increased tourism numbers as some fans decide to reside in the country rather than in Qatar, and has introduced a multiple-entry visa for those attending the competition. Kuwait and Jordan are also receiving more tourists, and Saudi Arabia expects a spike in pilgrims and related hotel stays.

Moreover, Qatar is wagering that the Cup will jump-start tourism in the longer term, too: The government is targeting 6 million visitors annually by 2030, up from 2 million in 2019. Finally, at least some of the infrastructure built for the competition—including a metro line in Doha and an airport—will serve a permanent economic purpose, dovetailing with the objectives of encouraging tourism and diversifying the economy.

The legacy of the 2022 World Cup for Qatar remains an open-ended question. For now, our panelists expect GDP growth to more than triple this year from 2021’s modest 1.6%, only to halve next year as the economic buzz from the tournament fades into the background.

On the outlook for Qatari GDP growth, analysts at S&P Global commented:
“We anticipate an acceleration in GDP growth this year as non-hydrocarbon sectors such as tourism, transport, and construction benefit from Qatar’s hosting of the World Cup, which is expected to bring in about 1.2 million tourists. Economic growth thereafter is likely to be relatively soft through 2025. Government investment, much of which is outside the hydrocarbon sector, will gradually decline, with major infrastructure projects nearing completion.”

Fitch Solutions said:
“In Q422, the hosting of the tournament will have immediate positive effects on Qatar from the perspectives of real GDP growth and the balance of payments via higher consumption, government spending and services exports. On the other hand, the surge in Qatar’s population during the months of the World Cup tournament will lead to substantial demand-side pressure, which will contribute to above-trend inflation and will require a significant increase in goods imports, including food and beverages, as well as a fall in the volumes of LNG available for export.”

---

 

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinion of FocusEconomics S.L.U. Views, forecasts or estimates are as of the date of the publication and are subject to change without notice. This report may provide addresses of, or contain hyperlinks to, other internet websites. FocusEconomics S.L.U. takes no responsibility for the contents of third party internet websites.

Author: Hannah, Editor

Date: November 30, 2022