Credit Suisse warns of cost overruns for Qatar World Cup
Banking giant Credit Suisse has warned of the consequences should Qatar lose the rights to host the World Cup in 2022.
Bank of America Merrill Lynch have already weighed into the debate as the world awaits the findings of a FIFA corruption probe into the awarding rights – being conducted by international lawyer Michael Garcia – who is due to reveal his findings next month.
In its latest report, Credit Suisse suggests equities could fall 20% should Qatar lose the World Cup in eight years’ time.
However, it stresses the loss could provide an opportunity for buyers to snap up potential bargains.
Qatar plans to spend $212bn in the next seven years to build the football stadiums but also a rail network, metro, housing and a new city.
Although these developments will go ahead regardless of the prestigious football tournament, concerns have been raised over possible delays should the country be stripped of the hosting rights.
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 said.
According to a report in the Wall Street Journal, Credit Suisse predicts the World Cup will have a particular effect on 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.
However, it warned: “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.”