(MENAFN- The Peninsula) deepak john |
The Peninsula
Qatar's position as a leader in the sporting sphere and bringing one of the world's biggest tournaments to the Middle East – FIFA World Cup 2022 is expected to have a substantial positive impact on the country's economy. The World Cup will pave way for Qatar to enjoy potential near-term economic gains and lead to positive spillover effects for the rest of the region according to a report by Standard and Poor's (S&P) Global Ratings.
The tournament will boost tourism, travel, hospitality, and real estate sector as thousands of fans have gathered from all across the globe. Also, Investments in sporting venues, transport and utilities infrastructure, and hotels and leisure facilities will provide potential near-term economic gains.“The positive effects will come mainly from higher rental and occupancy rates in residential real estate. At the end of 2021, rents had already started picking up, but sales prices have hardly improved. Rental revisions are notable but vary depending on property type. We expect the supply of new residential units to speed up compared to the past few years, raising the total residential space to 323,000 units, up by 5 percent (Valustrat, Q2 2022 report). Occupancy rates will improve as the event approaches and will translate into much stronger cash flow generation.”
Qatari companies are expected to benefit from the World Cup, the report stated,“We expect the hospitality, residential real estate, retail, and telecoms sectors to reap tangible benefits from the World Cup. Entities' fourth-quarter earnings should benefit from the increased activity, but we don't foresee any structural changes to the long-term credit profiles of the corporates we rate.”
S&P report noted that the country reportedly had about 30,000 rooms at the end of 2021 but expects to see a more than 30 percent increase in 2022 as many new hotel openings have been fast-tracked for the World Cup.“We expect the event to further lift average daily room rates, which had already started to recover in 2021, and lead to close to full occupancy during the event.” About retail sector the report noted that higher international visitor numbers will increase traffic in malls, which have been gradually recovering since the pandemic. Higher footfall will propel retail sector recovery, thereby temporarily increasing the variable lease component that will benefit mall operators. Still, new projects this year have increased retail space by over 20 percent, leading to additional capacity that will put pressure on rental rates and occupancy in the longer run.
The telecom operators in Qatar (Ooredoo and Vodafone) will also benefit from an influx of football supporters. Operators have incurred some additional costs as they get ready to welcome up to 1.5 million visitors, but we expect those to be offset by higher seasonal profits as roaming revenues increase along with data consumption.
“We expect Ooredoo to report an increase in pre-paid customers in its fourth quarter, as well as higher roaming and data revenue. It should also benefit from higher video feeds and data transport for the media broadcasters that will be relaying the event globally. World-leading fiber and 5G penetration in Qatar will enable Ooredoo to address higher demand, in our view,” it added.
Overall, the World Cup will have a limited effect on Qatar's banks compared to the benefits of the government's broader infrastructure development plan.
There has been some material tangible benefits, however. Loan growth has benefitted from the increase in associated economic activity over the planning and development phases, particularly from the uptick in credit demand related to the construction of infrastructure required to host the tournament.
The report further stated,“We also expect consumption lending and working capital needs to increase over the fourth quarter of 2022, boosting private-sector credit growth toward 5 percent for the year, before slowing in line with real GDP expectations. Indirectly, the tournament will likely boost sectors that suffered during the pandemic, particularly tourism, travel, hospitality, and real estate.”