Gulf Cooperation Council (GCC) economies are set to get an extra boost from the upcoming FIFA World Cup Qatar 2022. This paves the way for Qatar to enjoy potential near-term economic gains but also highlights the logistical challenges of managing the event, which will likely lead to positive spillover effects for the rest of the region according to Standard and Poor’s (S&P) Global Ratings report.
More than 1.2 million fans are expected to attend the event, increasing Qatar’s population by about 1.5 times. GCC economies already benefiting from high hydrocarbon prices and are set to get an extra boost from this month’s FIFA World Cup “We also foresee a post-World Cup slowdown in economic activity in Qatar. Oversupply in the hospitality and real estate sectors could somewhat moderate their performance, although we don’t expect this to materially affect banking sector asset quality,” S&P said in a credit FAQ titled, ‘World Cup Will Give An Additional Near-Term Boost To GCC’.
“We estimate real GDP growth of 4.8 percent in 2022, a sharp increase on 2021 (1.5 percent), partly due to the additional economic activity associated with the World Cup, but also reflecting the ongoing recovery following the removal of COVID-19-related restrictions. We estimate non-oil GDP growth in 2022 at 8 percent, compared with close to 3 percent in 2021,” the report said.
It further said, “We expect hydrocarbon sector growth to be broadly flat, but because this sector (mostly gas production) accounts for about 65 percent of real GDP this lowers our overall GDP estimate. We foresee a significant increase in Qatari gas production only from 2025 onward as a result of some phases of the NFE beginning that year. This would increase QatarEnergy’s LNG production capacity from 77 million tons per year (mtpa) currently, to 109 mtpa in 2025 and to 126 mtpa by 2027.”
The authorities have been implementing a 10-year roadmap of projects for 2015-2024 to diversify the economy, as part of Qatar National Vision 2030, and prepare for the World Cup. We estimate the government’s capital expenditure to average 13 percent of GDP over 2015-2022. The projects have focused on roads, a new metro and sewage system, hospitals, and schools. These investments would have taken place with or without the World Cup. Direct spending on sporting facilities to house World Cup events has been small in comparison, budgeted at about 3 percent of GDP.
Regarding the benefit wider GCC will get from the World Cup, S&P report noted said, “We expect so. Qatar’s Supreme Committee for Delivery and Legacy is confident there will be no shortfalls in accommodation, with up to 130,000 rooms for the one-million-plus fans expected during the 28-day event. Accommodation options in Qatar include two cruise ships with more than 4,000 cabins, and fan villages at four different locations. People can also stay in apartments, villas, holiday homes, Bedouin tents, and caravan villages. We expect that neighboring GCC countries will also host large numbers, benefiting their aviation and tourism sectors.” Although we see spillover effects across the region, we expect Dubai (not rated) to be the main beneficiary outside of Qatar, given its geographical proximity and its already well-established tourism offering, major attractions, airline connections with the region and the world, and multiple-entry tourist visas for World Cup ticket holders.
