Impact of the FIFA World Cup on the Russian economy
Organized by Russia, 21st edition of the FIFA World Cup starts on June 14 and ends on July 15. Followed in almost every region of the world and remembered by fans for decades, the FIFA World Cup is no ordinary sporting event. According to FIFA estimates, up to 250 million people play football and there are more than 1.3 billion fans of the sport in the world.
Given its popularity, universal fan membership, and economic impact, the FIFA World Cup is as much an economic event as it is a sporting event. For the host country in particular, the prestigious event is a measure of its sporting prowess and a rare opportunity to showcase its social and economic strength.
The successful execution of the FIFA World Cup also means arriving on the world stage as a country worthy of attention. With stakes so high, InstaReM tries to determine the economic impact of the world’s biggest sports extravaganza starting this week!
Overall tournament expenses
The most watched sporting event in the world is also one of the most expensive to run. The Russian government estimates total spending on the 2018 FIFA World Cup at around US $ 11 billion (683 billion yen).
Of this amount, 4.22 billion US dollars (265 billion euros) was spent on the construction of sports infrastructure, 3.63 billion US dollars (228 billion euros) on the improvement of sports facilities. transportation in and around match venues across Russia and US $ 1.18 billion. billion (₽ 74 billion) were spent on supporting infrastructure. Other operating expenses amounted to $ 1.85 billion (₽ 116 billion).
Sports infrastructure spending accounted for over 38% of total spending. A total of 12 stadiums – with a total capacity of 550,000 seats – in 11 Russian cities (Moscow, Saint Petersburg, Sochi, Kazan, Saransk, Kaliningrad, Volgograd, Rostov-on-Don, Nizhny Novgorod, Ekaterinburg and Samara) were built and renovated at a cost of $ 4.22 billion (265 billion). No less than 96 training sites with a capacity of 16,000 children and young people have been developed across the country for use beyond the World Cup tournament.
Transport and public service infrastructure
Russia has spent a lot on its transport infrastructure and public services. Aeronautical infrastructure spending is estimated at US $ 1.9 billion (₽ 117.8 billion), including 11 airports with new terminals. Moscow airports will be the main beneficiaries, as improved aviation infrastructure will support increased passenger traffic even after the event.
Three new metro stations and 12 new roads and junctions were also built. Twenty railway terminals / stations have been reconstructed and modernized, and 178 km of roads have been constructed or improved. In addition, work on the $ 2 billion (₽ 124 billion) -Moscow Central Ring, a new railway line comprising 31 stations, was accelerated before the World Cup (not part of the expenditure related to the Cup. of the world).
Hosting the FIFA World Cup also involves building and upgrading the supporting infrastructure.
According to reports, as many as 13 hospitals have been renovated or rebuilt. Likewise, 29 utility facilities and 12 power plants were built or upgraded.
No less than 27 new hotels have been built with increased tourist arrivals in mind during – and beyond – following the FIFA World Cup.
10 water supply and sewage system projects were constructed and improved, and 4 infrastructure sewage system improvement projects were implemented. More than 800 hectares of parks and green spaces have been developed on several sites.
About US $ 1.18 billion (₽ 74 billion) was invested in the construction and renovation of housing, medical infrastructure and electrical systems. These expenses will have long-term utility and will continue to contribute to the Russian economy well beyond the World Cup.
Stimulation of tourism
It is estimated that Russia will welcome an additional 570,000 international fans in June and July 2018, in addition to an average of 4.3 million total international visitors to Russia during the same period over the past four years.
The number of tourist arrivals could reach 2 million according to forecasts by the Russian state tourism agency. With nearly 700,000 Russians also expected to attend the matches, the economic impact will be most visible for retailers / restaurants / hotels.
It is estimated that visiting fans spend on average between US $ 5,000 and 8,000, contributing between US $ 2.5 billion to US $ 4 billion in consumption. It is also estimated that countries that host certain events benefit from an increased tourist flow the following year, of around 25%.
Besides the positive contribution of increased retail sales, the Russian economy could be positively affected by the creation of additional jobs.
Each year, around 220,000 jobs were created and maintained during the preparation and hosting of the World Cup, resulting in an increase in personal income of US $ 6.59 billion (₽ 414 billion).
The service, transport and commerce sectors have traditionally seen an increase in temporary employment in the year of the World Cup. According to data from the Russian government, 210,000 Russians have acquired additional skills in the preparation and organization of large tournaments.
Of these, 79,000 people upgraded their skills in the construction sector, 38,000 upgraded their skills in the hotel industry, 18,000 people found new opportunities in the transport and communications sectors, 18,000 improved their skills in public, social and personal services, and 52,000 people were volunteer training. About 5,000 people will be involved in public administration and security functions.
The long-term impact of the FIFA World Cup on the Russian economy
While the World Cup is a highly anticipated international sporting and social event, it has become a major business phenomenon. FIFA World Cup tournaments have accelerated the economic development of host regions in the past, and they continue to have a positive long-term impact on host countries.
For Russia, spending related to the World Cup was evenly distributed between 2013 and 2017, with an average annual investment of around US $ 2 billion per year during this period, which corresponds to around 1% of the total annual fixed investments and 0.2% of GDP. Nordea Markets, a leading investment bank in the Nordic region, forecasts additional GDP growth of 0.15-0.25% due to the effect of the World Cup.
The Russian government estimates the combined impact of the World Cup on Russian GDP at US $ 13.80 billion (₽ 867 billion), which is equivalent to around 1% of Russia’s GDP. The Russian government also estimates that the increase in GDP will range from US $ 26 billion (₽ 1.62 tn) to US $ 30.8 billion (₽ 1.92 tn) over 10 years from 2013 to 2023.
Massive investments in infrastructure often have a huge impact. The real contribution of the FIFA World Cup to the Russian economy could be much larger than what is currently visible and will be realized in the long run. As the Russian government’s report says, the World Cup will leave a huge tangible and intangible legacy, which will benefit generations of Russians.
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