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FIFA 2022 World Cup Loss Will Drag Down Qatar’s GDP Growth – Report

FIFA 2022 World Cup Loss Will Drag Down Qatar’s GDP Growth – Report

Direct world cup spending is estimated to be $16 billion, which is 7.5 per cent of Qatar’s GDP, says report by Bank of America Merrill Lynch.

Qatar’s real GDP growth will slow down by at least 0.5 per cent annually if the country is stripped of its right to host the 2022 World Cup due to bribery allegations, a new report from the Bank of America Merrill Lynch has found.

The FIFA panel that is investigating corruption and the bribery allegations regarding the 2018 and 2022 bids is due to come out with its findings in mid-July.

If Qatar is stripped of the hosting rights for the 2022 World Cup, it could have some negative equity implications, the report stated.

“The direct World Cup-related spending (stadiums and hotels) is small at $16 billion (7.5 per cent of GDP, or an annual 1-1.5 per cent of GDP over the period),” said Jean Michel Saliba, EEMEA economist at Bank of America- Merrill Lynch.

“We estimate the multiplier effect is low (0.3-0.5) due to remittances, profit repatriation and capital goods imports leaks. Assuming 50 per cent bank financing, this is just five per cent of system loans and impact on loan growth is thus likely to be modest.”

Although the direct impact due to potential loss of the World Cup 2022 hosting rights is small, broader infrastructure pipeline could face delays, the report said.

“Our five-year projected cumulative on-budget central government capex stands at $100 billion (which could represent around at third of total investments during the period),” said Saliba.

“This pipeline would likely lose execution focus and face potential delays, in case Qatar is stripped from hosting the World Cup.”

He added that a breakdown of the ongoing and planned projects suggests the pipeline would eventually proceed in some way.

“Infrastructure projects, central to Qatar’s transformation vision, form the bulk of it and a number of megaprojects such as Lusail City, the metro, railway or seaport were planned independently of the World Cup,” said Saliba.

Qatar’s government spending rose almost 33 per cent in the first half of the current fiscal year after a slow start to FIFA 2022 projects.

However, the International Monetary Fund (IMF) has warned that lavish public expenditure could lead to overheating of the economy in the short term while leading to over capacity in the long term.

The Gulf country toned down expenditure earlier this year as it reduced the number of stadiums from 12 to eight for the tournament. Qatar is also looking to reschedule around 15 per cent of its planned projects as it reviews its budget allocations for the World Cup, a Reuters report said.

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