World Cup to generate major economic boost

The announcement of Russia as the host of the World Cup has investment analysts tipping an economic multiplier effect for Russia.

­Russia has vowed to spend almost 4 billion dollars on building and repairing stadiums for the World Cup in 2018.

Plamen Monovski of Renaissance Asset Managers says the total expenditures will be enormous but generate a major boost to the Russian economy.

“The first and most substantial effect would be the beginning of a very large infrastructure cycle, that we estimate will go on for close to a decade.  And the numbers are very large, we anticipate trillions of dollars to be spent across the entire economy.  And the World cup is just the catalyst for that.  We again estimate, in Renaissance asset management, we think that, like in the case of South Africa, a percent, even a percent and a half to GDP growth.  Clearly Russia is a much larger country than South Africa, employment in South Africa went up by about 70 thousand people – we think the effect in Russia might be a lot more profound, and this will also lead to the creation of a value chain of a lot of companies that didn’t even exist before, and that will have further multiplier effect, construction companies will have the greatest benefit.  We need to do the basics in Russia.  You know, the road network is in very poor condition.  Russia is 111th in the world in terms of the state of its road infrastructure – something the Kremlin realizes.  And that’s where the first efforts will be.  The numbers that we work with are showing us that there will be about 14 thousand kilometers of road to be built, and we estimate this is going to be more than 50 billion dollars.  So everybody that’s involved  in road construction, including bridge construction – complex and more simple – will benefit tremendously."

Andrew Cranston from KPMG adds that securing the World Cup will improve consumer confidence in Russia and attract foreign investment to the country.

“This is going to be a great opportunity, there’s going to be a lot to be done in construction in the tourism industry and a number jobs are going to be created in terms of organizing the event. But the overall halo effect is probably the most important thing because it’s another great sign about the opportunities Russia presents.”