S&P Explains Economic And Financial Impact Of Qatar's 2022 World Cup

S&P Explains Economic And Financial Impact Of Qatar's 2022 World Cup
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Published December 22nd, 2010 - 13:04 GMT

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Dubai
,
Matthew McAdamS
,
Qatar Investment Authority
,
FIFA

According to Standard & Poor's Ratings Services, the decision by FIFA to award the 2022 World Cup to Qatar (AA/Stable/A-1+) will have a significant impact on the country's economic and financial future. In a report released today, "FAQ On The Economic And Financial Impact Of Qatar's 2022 World Cup", credit analyst Luc Marchand explains Standard & Poor's views on how the World Cup may affect Qatar's development and its ratings. "We do not anticipate any change in the ratings at this time as 2022 is much further into the future than the horizon for our stable outlook," Mr Marchand said. "That said, we believe the World Cup will have a substantial impact on Qatar's already promising economic growth over the next few years as the country readies itself to host this major sporting event," he added. Additional government infrastructure spending for the World Cup is estimated at about 233 billion Qatari riyals ($64 billion, or 47% of 2010 GDP). New stadia, footballers' and fans' facilities and other basic infrastructure (such as the metro rail system and road extensions) are expected to be built, notably. "We do not expect a significant increase in the level of sovereign debt. As in the past, we expect most of the infrastructure will be financed via revenues from the oil and gas sectors. In our opinion, this could lead to a lower, although still substantial, surplus in the government's budget at above 7% of GDP in 2011-2013," Mr. Marchand said. Additional moderate borrowing is possible as has already occurred via government guarantees. For example, Standard & Poor's rated bonds issued earlier this year by a subsidiary of the Qatar sovereign wealth fund, the Qatar Investment Authority, through an SPV (Qatari Diar Finance QSC). The SPV issued $3.5 billion in government guaranteed bonds in July 2010, rated 'AA' by Standard & Poor's, which was used to finance large-scale real estate projects in Qatar. In the article, we address the following questions:How does FIFA's announcement affect the outlook for Qatar's sovereign credit ratings?What impact will the World Cup have on Qatar's economy?With the expected infrastructure needs for the project, do you expect debt to be issued by Qatar in the coming years, and how frequently do you expect Qatar will have to tap the debt markets? What are the maturities of Qatar's debt -- when will repayments peak?To what extent will Qatar's ability to finance its debt depend upon revenues from oil and gas production?What are the downside risks for Qatar in engaging in these substantial investments?How will the award of the World Cup to Qatar affect the region over the next few years? Could other GCC states see stronger demand for Middle Eastern sovereign debt?Analyst contacts:Luc Marchand, LondonMoritz Kraemer, Frankfurt Media contact:Matthew McAdamS&P Communications, LondonTel: +44 (0) 207 176 3605Email: matthew_mcadam@standardandpoors.com
Press Office Contacts:Dubai: +971 437 27 171London: +44 20 7176 3605Paris: +33 1 44 20 6740Frankfurt: +49 69 33999 225Milan: +39 02 72 111 245Madrid: +34 91 389 6944Moscow: +7 495 783 4009Stockholm: +46 8 440 5914

Standard & Poor's, a subsidiary of The McGraw-Hill Companies (NYSE:MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research and data. With offices in 23 countries and markets, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for 150 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com

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