By Joe Aylott, Multi-Asset Strategist, Coutts
- Hosting the World Cup could lift spending and activity, but economic gains can be overstated.
- Neither the hosts nor the winners show consistent economic outperformance, though winners may see a modest, export-driven uplift.
- Investors should focus on fundamentals – any market benefits are usually temporary, and long-term returns depend on broader economic drivers rather than one-off events.
Over the coming weeks, an estimated 6.5 million fans will attend World Cup football matches across the US, Canada and Mexico. Alongside the spectacle will come a surge in spending, with hotels, airlines, retailers and hospitality all likely to see a lift.
A joint study by FIFA and the World Trade Organisation suggests the tournament could contribute $17.2 billion to US GDP, alongside $30.5 billion in gross output and around 185,000 jobs. On the surface, this looks like a respectable boost for the economy and markets.
However, as in football, the headline score does not always tell the full story.
Academic research by Professor Victor Matheson at the College of the Holy Cross in Massachusetts – a well-known sports economics expert – finds that pre-tournament forecasts could overstate the economic benefits of hosting.
Once the final whistle has blown, the realised gains are often far more modest – and occasionally negative. Across most of the academic research Matheson highlights, there is limited statistically significant evidence of a positive impact on labour markets or economic activity – both important influences on returns.
There are several reasons for this. Much of the spending is simply redirected rather than new (‘the substitution effect’) as domestic consumers shift their spending patterns. At the same time, regular tourists may stay away due to congestion, offsetting some of the inbound demand. And a meaningful share of profits flow to international organisations such as FIFA or global hotel operators, rather than remaining within the domestic economy.
Hosting is also capital intensive. Brazil and Russia each spent around $12 billion staging their tournaments, according to Matheson’s paper, while Qatar’s investment exceeded $200 billion – albeit with a significant portion allocated to broader infrastructure and long-term development.
From this perspective, this year’s tournament could offer a relatively better return, given that much of the required infrastructure was already in place across the US, Canada and Mexico, reducing the need for costly new investment.
Winner takes all?
If hosting the tournament is not necessarily the most economically rewarding strategy, is it any better for the winners?
Research from the University of Surrey suggests that it could be. The research found that a country’s GDP growth in the two quarters following a World Cup win could rise by up to 0.25%. Interestingly, it concluded that this uplift was driven not by stronger domestic consumption or investment, but by increased export growth. In other words, success on the global stage can enhance the international appeal of a country’s goods and services.
However, our own analysis of economic growth following past tournaments didn’t reveal a huge amount of evidence for this at more recent tournaments. We looked at the last six World Cups and compared the winning nation’s GDP growth 12 months after the event (relative to its previous 10-year average) to the equivalent figure for the hosts.
The results showed no clear advantage to either, with the host nation doing better on three occasions and the winners outperforming on the other three.
This all further reinforces the point that, while the World Cup can provide a temporary uplift to an economy, it is not enough to counter the wider drivers of economic growth such as inflation, interest rates, and labour market strength.
