Football World Cup is the seminal global sports event attracting massive audiences. The 2014 World Cup in Brazil attracted over 3.2 billion viewers with 1 billion fans tuning in for the final. The World Cup, which is held every 4 years, is big business with FIFA expected to generate $6 billion in revenue and Russia investing over $14 billion for hosting the world cup. Apart from the leisure perspective, there are some serious noteworthy effects of the World Cup which affect the countries’ prospects in both the short-term and the long-term.
The ‘Trickle Down Effect’ of the World Cup
The country winning the bid to host attracts a lot of interest from the investors. The country selected has the access to the revenues from the event. It improves the country’s reputation among other countries. Another aspect to be considered is the elevated investment figures. The host country experiences a surge of investment as the World Cup attracts huge interest and the future prospects of the country are also better perceived. It also has a favorable effect on the host country’s external account, as the country becomes a hot tourism spot. This results in huge inflows of foreign exchange giving a nice upswing to the forex reserves of the country. Industries like hotels, logistics, and infrastructure receive a spur in their revenues even after the event because the investment for the event serves them in the long run as well. According to an analysis, around 220,000 jobs have been created so far on account of the World Cup in Russia. As per a report by Russia’s World Cup organizing committee, the GDP for the next five years could see an addition of around 150-210 billion rubles.
The benefit is not restricted to the host company. Goldman Sachs predicts that the stock market of the country who wins the World Cup tournament outperforms the global average by 3.5% whereas the runner-up country’s stock index slumps by around 5.6% in a couple of months after the tournament.
A fall in the number of trades and volumes is observed when the national team of a stock exchange plays during the trading hours and it further drops when a goal is scored. A research paper from the European Central Bank indicates that trading activity fell by 48% in 2014 and 36% in 2010. The same research also discovered that a goal during the match led to an immediate decrease in trading by 10%. This effect was even more marked in certain countries. Chile saw a 99% drop in trading when its match was being played out. Brazil saw a 75% drop.
Conclusion
The football World Cup is an extremely prestigious tournament. With Russia being the host, there are multiple geo-political undertones to the event. Russia is the biggest winner of this World Cup, which is easy to conclude. But what is more interesting is how it will affect forex and individual stock markets especially when the country in question is playing on the field.
