What happens when your favourite emerging market gets the nod to host a major world sporting event? Sadly, surprisingly little; trends matter more.

A Citi note on Tuesday cuts through South Africa’s World Cup fever:

Hosting the 2010 FIFA Soccer World Cup probably will bring tangible but small economic benefits to the SA economy. While stadium and transportation infrastructure construction provided the main boost prior to 2010, we expect World Cup-related tourism inflows to boost this year’s real GDP by up to 0.5%.

Well, 0.5 per cent is nothing to be sniffed at compared to South Africa’s recent, and somewhat risk-prone, growth profile. But it’s rather hard to discern the blessings of Fifa elsewhere, according to Citi. Take infrastructure:

On balance, though, it appears that while non-negligible, the impact on the economy of World Cup-related investments should not be exaggerated. In particular, the size of these investments pales in comparison with the overall infrastructure build programme implemented in the public sector since 2006, the bulk of which is carried out by the State and state-owned electricity utility Eskom . . . Equally important is the fact that this infrastructure build will continue after 2010 – and hence, risks of a sudden drop in construction and related activities now that pre-World Cup building is nearly over, are rather limited.

Shades of China in 2008, of course. The Beijing Olympics were similarly a drop in the ocean of a far vaster emerging market and truly Olympian fixed capital growth.

As for the World Cup’s much-vaunted ‘legacy’ – unless a short-term jump in the rand from tourism inflows excites you, Citi’s note has relative disappointment in store for South Africa here, too.

None of this surprising, of course. Countries have long cared more for the symbolic capital and soft power of playing host to world sports jamborees – emerging markets included.

By contrast, FT Alphaville eagerly awaits an analyst note on sporting events’ wider effect on not-so-emerging markets. The precise financing, let alone economics, of Athens’ 2004 Games, for instance. . . or London come 2012. Panem et circenses, indeed.

Related link:
The World Cup is no economic boon for South Africa – FT

This entry was posted by Joseph Cotterill on Tuesday, March 9th, 2010 at 10:43 and is filed under Capital markets. Tagged with emerging markets, olympics, rand, south africa, sport, sports, world cup. Edit this entry.