FIFA World Cup 2018 will have limited economic gain for Russia, Moody's say

The 2018 FIFA World Cup tournament will hurl host Russia into the global spotlight, but the mega football event will have limited impact on rated Russian companies, including banks, regional governments, and the sovereign itself.

The economic benefit will only be “short-lived”, Moody’s Investors Service said in a report released on Thursday. Much of the economic gain has already been attained through infrastructure spending, and even there the impact has been limited. World Cup-related investments in the 2013-17 period have accounted for only 1 per cent of total investments in Russia, which Moody rates Ba1 Positive.

"The games will last just one month and the associated economic stimulus will pale in comparison to the size of Russia's $1.3 trillion economy," Kristin Lindow, a senior vice president and analyst at Moody's, said in the report. "We do not expect the World Cup to make a meaningful contribution to broader economic growth."

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The host cities have already seen an improvement in transport and utility infrastructure, the report added. Russian food retailers, hotels, telecoms, and transport sector, on the other hand, will see a temporary boost in revenue, but the impact will be a one-off, leading to no material changes to business fundamentals or credit profiles of the companies, Moody’s noted.

Moscow-based airports are among the key beneficiaries as upgraded aviation and transportation facilities in the capital will support higher passenger flows, even after the event. Construction companies that were heavily involved in the build-up to the event are also among the key beneficiaries, but they would have already felt much of the economic impact through the course of the preparations, according to Moody’s.

The profitability of Russian banks in 2018 is also unlikely to see tangible upswing from the event. The additional revenue from higher transactions from the influx of tourists will unlikely exceed 1 per cent of the total sector’s profit this year, Moody’s said.

The rating agency also does not expect the added exposure related to construction activity for the World Cup to negatively impact the Russian banks' asset quality.

“While no official data is available, we estimate that this portfolio is below 1 per cent of the system-wide loan portfolio because the majority of expenditure is financed by the local and federal governments,” it noted.