Russia is hosting the 2018 Fifa World Cup. At an estimated cost of over $14.2 billion,12 it will be the most expensive World Cup in history,13 surpassing the cost of the 2014 FIFA World Cup in Brazil.1415
Brazil ecomonicsIn 2014, the FIFA World Cup was hosted in Brazil. This decision was based off location and close evaluation through various economical models. After years of unnecessary construction, eminent domain and countless protests, Brazil was found to be in a worse state than before. Unfortunately. Costs of the tournament totalled $11.6 billion,18 making it the most expensive World Cup to date,19 until surpassed by 2018 FIFA World Cup which cost an estimated $14.2 billion.20 FIFA was expected to spend US$2 billion on staging the finals,21 with its greatest single expense being the US$576 million prize money pot.22 That money could have been allocated to other departments of the inner communities of this country including health care and education to name a few.
Russian President Vladimir Putin will be hoping that the soccer World Cup, which starts on Thursday and puts his country in the international spotlight, will bring an economic boost – but experts are downbeat about any long-term benefit.
Russia will host the largest event on the footballing calendar from June 14 to July 15, with the tournament being held in a handful of cities including Moscow, St. Petersburg and Sochi. It is the first time that Russia will host the Cup and, having reportedly spent over $14 billion on hosting the tournament, this competition is the most expensive in its history.
The World Cup organizers are expecting 570,000 foreign fans and 700,000 Russians to attend World Cup matches in Russia, giving the tourism sector, ranging from hotels to restaurants, a boost, albeit a short-term one.
“Hotels are all sold out and … last night, I was out and restaurants and bars were packed. You can only start to imagine how much money the economy will make hosting such a major event,” R. Susikumar, who used to play for Singapore, told CNBC Street Signs Asia on Thursday.
The massive construction projects that were carried out in World Cup host cities had the most impact on the economy in 2016 and 2017, said Alexei Zabotkin, head of investment strategy at VTB Capital.
The first reason is simply the opportunity cost of hosting a major sporting tournament. The money spent on new or upgraded infrastructure is likely to be more wisely used in long-term investments in critical areas of the economy. Large-scale construction is typically justified on the grounds that it will boost economic growth in the short term, and improved infrastructure will bring long-term gains to society.
Though this may be true – an increase in government spending should lead to a rise in Gross Domestic Product – the World Economic Forum’s Inclusive Growth and Development Report argues that focusing on inclusive growth is more important. This means spending to deliver both economic growth and broad-based, sustained improvements to living standards.
There are multiple revenue streams that exist for organizers, including gate receipts, merchandise sales, sponsorships and licensing agreements, but by far the biggest income flow comes from television rights. However, the governing bodies behind sporting events are taking an increasing share of these spoils, making it harder for even the most efficient local organizers to make money.
The Economist shows that the International Olympic Committee (IOC) now takes more than 70% of television revenue from the Games, up from 4% between 1960 and 1980. Soccer’s governing body FIFA generated almost $5 billion in revenue from the 2014 World Cup, about half of which came from television rights, despite them contributing nothing to the costs of staging the tournament.