Updated June 3, 2015 1:55 p.m. ET
DUBAI—This week’s resignation of FIFA President Sepp Blatter <a href="http://ift.tt/1KNaAn5; target="_self" class="icon none"/> has turned a spotlight on Qatar, which is spending $200 billion to prepare to host the 2022 World Cup and now faces the prospect of losing it.
Qatar has said it welcomed any investigation into how the World Cup was awarded since twin probes against FIFA emerged last week.
But Tuesday’s decision by Mr. Blatter—the biggest champion of Qatar’s controversial bid—to step down, amid a spending spree on stadiums, roads, rail and real estate, has sparked speculation about the economic hit the loss of the World Cup would bring.
“A potential change in venue would be a setback for Qatar’s economy,” said Giyas Gokkent, a Dubai-based economist at the International Institute of Finance. He said business confidence, tourist arrivals and, ultimately, economic growth in Qatar face risks.
The news of Mr. Blatter’s resignation sent the Qatar Stock Exchange’s main index down 3% early Wednesday, led lower by construction firms and the banks financing them—two sectors heavily involved in the World Cup. But the index recovered to end slightly lower at 12182.09.
The early selloff underscored investors’ nervousness, economists said.
Last week, U.S. officials brought charges against more than a dozen current and former FIFA officials and sports-marketing executives, alleging widespread corruption over a two-decade period. U.S. authorities confirmed they are gathering evidence linking Mr. Blatter to the sweeping investigation. Swiss prosecutors are also looking at how FIFA awarded the hosting rights to Russia for 2018 and Qatar for 2022.
Qatar on Wednesday said the recent developments wouldn’t impact its preparations. It is currently building five stadiums under construction.
“Qatar has faced criticism from the moment we won the right to bring this tournament to the Middle East for the first time,” the Supreme Committee for Delivery and Legacy said. “We remain committed to using the World Cup as a platform to break down prejudice and misconceptions.”
The jitters for Qatar—the world’s largest exporter of liquefied natural gas and a big oil producer—come as the country grapples with the impact of lower oil prices, which the International Monetary Fund says will send the country into a budget deficit next year.
For the past decade, Qatar has been trying to grow its global presence politically and economically, buying stakes in blue-chip Western companies and investing in real estate in London, New York and Paris. It also supported Islamist movements across the Middle East after the Arab Spring, drawing the ire of some its traditional Gulf allies.
Qatar had begun diversifying its economy away from hydrocarbon wealth ahead of winning the bid in 2010, but the event has acted as a beacon for attracting investments into other sectors of the economy.
The government has used its large natural-resource wealth to spur construction of shiny skyscrapers, hotels, futuristic museums, a giant new international airport and schools and hospitals for its citizens. More is expected for the World Cup.
More than 1,200 workers have died so far on infrastructure and real-estate projects related to the World Cup, according to the International Trade Union Confederation. Qatar vehemently denies the claim and says no laborers working on stadiums for the World Cup have died.
“There’s risk that if Qatar does build this entire infrastructure and the World Cup doesn’t happen, over the long run it could end up with significant overcapacity,” said Jason Tuvey, an economist at London-based Capital Economics.
Although World Cup stadiums make up roughly 2% of the total spending by the Qatari government through 2021, the IMF said, spending on projects such as a $36 billion metro and rail system would likely be reviewed if the World Cup were to be lost, analysts said.
Weaker spending could also scuttle contracts with big European and Asian contracting firms including U.K.-based Carillion<span class="article-chiclet hide up" data-channel=""> CIOIY 0.00 % PLC, Italian construction firm Salini Impregilo<span class="article-chiclet hide down" data-channel=""> SAL -0.49 % SpA and South Korea’s SK Engineering & Construction Co., all of which have won contracts with Qatar valued at hundreds of millions of dollars.
But most costly for Qatar should it lose the World Cup could be the one million tourists forecast to descend on the tiny country.
Ahead of the 2014 World Cup in Brazil, the country’s tourism minister, Vinicius Lages, forecast the event would add $13.6 billion to the country’s gross domestic product. That is about 7% of Qatar’s annual GDP this year.
“A relatively small share of planned project spending in Qatar is directly related to the World Cup, but 2022 has provided a deadline for a broader range of investment in infrastructure,” analysts at Cairo-based EFG Hermes told clients in a note on Wednesday.
“The prospect of Qatar losing the World Cup will mean greater uncertainty about medium and long-term public spending,” EFG said, while downgrading its outlook for the country’s stock market to underweight. “Rising uncertainty about the status of the FIFA World Cup in 2022 is likely to put pressure on Qatari stocks for some time.”
Write to Rory Jones at rory.jones@wsj.com and Nicolas Parasie at nicolas.parasie@wsj.com
DUBAI—This week’s resignation of FIFA President Sepp Blatter <a href="http://ift.tt/1KNaAn5; target="_self" class="icon none"/> has turned a spotlight on Qatar, which is spending $200 billion to prepare to host the 2022 World Cup and now faces the prospect of losing it.
Qatar has said it welcomed any investigation into how the World Cup was awarded since twin probes against FIFA emerged last week.
But Tuesday’s decision by Mr. Blatter—the biggest champion of Qatar’s controversial bid—to step down, amid a spending spree on stadiums, roads, rail and real estate, has sparked speculation about the economic hit the loss of the World Cup would bring.
“A potential change in venue would be a setback for Qatar’s economy,” said Giyas Gokkent, a Dubai-based economist at the International Institute of Finance. He said business confidence, tourist arrivals and, ultimately, economic growth in Qatar face risks.
The news of Mr. Blatter’s resignation sent the Qatar Stock Exchange’s main index down 3% early Wednesday, led lower by construction firms and the banks financing them—two sectors heavily involved in the World Cup. But the index recovered to end slightly lower at 12182.09.
The early selloff underscored investors’ nervousness, economists said.
Last week, U.S. officials brought charges against more than a dozen current and former FIFA officials and sports-marketing executives, alleging widespread corruption over a two-decade period. U.S. authorities confirmed they are gathering evidence linking Mr. Blatter to the sweeping investigation. Swiss prosecutors are also looking at how FIFA awarded the hosting rights to Russia for 2018 and Qatar for 2022.
Qatar on Wednesday said the recent developments wouldn’t impact its preparations. It is currently building five stadiums under construction.
“Qatar has faced criticism from the moment we won the right to bring this tournament to the Middle East for the first time,” the Supreme Committee for Delivery and Legacy said. “We remain committed to using the World Cup as a platform to break down prejudice and misconceptions.”
The jitters for Qatar—the world’s largest exporter of liquefied natural gas and a big oil producer—come as the country grapples with the impact of lower oil prices, which the International Monetary Fund says will send the country into a budget deficit next year.
For the past decade, Qatar has been trying to grow its global presence politically and economically, buying stakes in blue-chip Western companies and investing in real estate in London, New York and Paris. It also supported Islamist movements across the Middle East after the Arab Spring, drawing the ire of some its traditional Gulf allies.
Qatar had begun diversifying its economy away from hydrocarbon wealth ahead of winning the bid in 2010, but the event has acted as a beacon for attracting investments into other sectors of the economy.
The government has used its large natural-resource wealth to spur construction of shiny skyscrapers, hotels, futuristic museums, a giant new international airport and schools and hospitals for its citizens. More is expected for the World Cup.
More than 1,200 workers have died so far on infrastructure and real-estate projects related to the World Cup, according to the International Trade Union Confederation. Qatar vehemently denies the claim and says no laborers working on stadiums for the World Cup have died.
“There’s risk that if Qatar does build this entire infrastructure and the World Cup doesn’t happen, over the long run it could end up with significant overcapacity,” said Jason Tuvey, an economist at London-based Capital Economics.
Although World Cup stadiums make up roughly 2% of the total spending by the Qatari government through 2021, the IMF said, spending on projects such as a $36 billion metro and rail system would likely be reviewed if the World Cup were to be lost, analysts said.
Weaker spending could also scuttle contracts with big European and Asian contracting firms including U.K.-based Carillion<span class="article-chiclet hide up" data-channel=""> CIOIY 0.00 % PLC, Italian construction firm Salini Impregilo<span class="article-chiclet hide down" data-channel=""> SAL -0.49 % SpA and South Korea’s SK Engineering & Construction Co., all of which have won contracts with Qatar valued at hundreds of millions of dollars.
But most costly for Qatar should it lose the World Cup could be the one million tourists forecast to descend on the tiny country.
Ahead of the 2014 World Cup in Brazil, the country’s tourism minister, Vinicius Lages, forecast the event would add $13.6 billion to the country’s gross domestic product. That is about 7% of Qatar’s annual GDP this year.
“A relatively small share of planned project spending in Qatar is directly related to the World Cup, but 2022 has provided a deadline for a broader range of investment in infrastructure,” analysts at Cairo-based EFG Hermes told clients in a note on Wednesday.
“The prospect of Qatar losing the World Cup will mean greater uncertainty about medium and long-term public spending,” EFG said, while downgrading its outlook for the country’s stock market to underweight. “Rising uncertainty about the status of the FIFA World Cup in 2022 is likely to put pressure on Qatari stocks for some time.”
Write to Rory Jones at rory.jones@wsj.com and Nicolas Parasie at nicolas.parasie@wsj.com
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