Morocco's macroeconomic and financial implications and benefits of hosting the 2030 World Cup
Hosting a major international sporting event like the FIFA World Cup has long been seen as a significant opportunity for countries to boost their economies and showcase their capabilities on the global stage. In 2030, Morocco will join the ranks of World Cup host nations, bringing with it a range of macroeconomic and financial implications and benefits.
Budgetary Implications and Macroeconomic Balances
Before delving directly into the significant economic benefits, it is important to highlight the costs of the organization and their implications.
Based on the initial estimated figures concerning the organization of the 2030 World Cup, as provided by some officials from the Ministry of Finance and studies conducted by some Moroccan financial institutions, there are significant financial implications. Considering the average cost of hosting a World Cup, it is estimated to range between 15 and 20 billion dollars for the trio of Morocco, Spain, and Portugal.
Morocco's share of this organizing budget is expected to be around 5 to 6 billion dollars (equivalent to 50-60 billion dirhams). A significant portion of the funding, approximately 25 billion dirhams, is expected to come from the public general budget. This will be allocated to finance the construction of stadiums and training centers and will be fully supported by the public budget for the period spanning from 2024 to 2030.
Furthermore, 17 billion dirhams is anticipated to be sourced from public companies to finance projects related to infrastructure and transportation networks. These funds are expected to be obtained through bank loans and/or private debt market mechanisms raised by SEGMA. Additionally, about 10 billion dirhams are projected to be raised through concessional foreign loans and donations and aid from other countries to cover other costs associated with the organization of the event.
These financial arrangements may result in certain macroeconomic imbalances, although they are deemed manageable thanks to the benefits of hosting the World Cup. Consequently, there might be a slight deterioration in the budget balance, but the financing is expected to be carried out without additional pressures on public finances.
Moreover, a short-term increase in the current account deficit is anticipated due to the rise in imports of finished and semi-finished products, representing approximately 1.5% of GDP. However, this trend is expected to reverse in the medium and long term, primarily due to several economic positive impacts, starting with the increase in tourism revenue.
Economic benefits
The first economic sector to benefit directly from this event is tourism. It is expected to yield short and medium-term gains driven by a significant influx of tourists during the year of the competition and the subsequent years.
There will also be improvements in the national hotel infrastructure to meet the long-term objectives of the tourism sector. Notably, an additional 100,000 hotel beds are expected to be provided to cater to the demand in host cities. Projected tourist revenues for the year 2030 are expected to reach 120 billion dirhams. Increased tourism revenue will contribute to economic growth and employment opportunities.
The service sector, including hospitality, catering, and transportation, will experience a substantial surge in demand. Restaurants, hotels, and airlines will benefit from the influx of visitors. Moreover, the hospitality industry is expected to expand, with new hotel projects and improved facilities to accommodate the surge in demand. These investments will have long-term economic benefits, bolstering the tourism sector's capacity and competitiveness.
In the construction sector (BTP), there will be substantial activity for several months, if not years, driven by large-scale projects including stadiums, infrastructure, roads, and more. This will boost the capacity utilization rates of construction operators. The production capacities for cement (22 million tons compared to the current consumption of 14 million tons) and steel reinforcement should be sufficient to meet demand.
The various projects are expected to increase the order books of publicly traded BTP companies, resulting in an additional turnover of 20 billion dirhams. It's worth noting that an average-sized stadium with a capacity of 40,000 seats consumes 10,000 tons of steel and 40,000 tons of cement, compared to 300,000 tons of cement for 100 kilometers of highway.
For the telecommunications sector, it is anticipated to benefit from the World Cup through increased voice and data traffic, as well as improved penetration rates at the national level. Investments will be made for the expansion and enhancement of the country's network infrastructure, along with the accelerated rollout of 5G technology.
The World Cup presents an opportunity for Morocco to attract foreign investment. Sponsors, both domestic and international, will be eager to associate their brands with this global event. This influx of capital can stimulate growth in various industries and encourage long-term investment in Morocco.
Hosting the World Cup will generate a considerable number of jobs across various sectors. From construction workers to hospitality staff, the tournament will create employment opportunities for Moroccans.
Concerning the infrastructure developed for the World Cup, it will leave a lasting legacy for Morocco.
Modernized transportation networks, stadiums, and training facilities will enhance the country's competitiveness and attract more international events, conferences, and tourists in the future. This legacy will continue to yield economic benefits long after the tournament has concluded.
Financial sector benefits
Hosting the World Cup in Morocco can have a substantial impact on the country's financial sector. While the direct economic benefits may not be as pronounced as those in sectors like tourism and infrastructure, the tournament can still bring significant advantages to Morocco's financial industry.
First of all, the surge in economic activity driven by the World Cup, such as construction and tourism, can result in increased banking activity. There will be higher demand for financial services, including loans, foreign exchange transactions, and investment services.
Banks and financial institutions can benefit from higher transaction volumes and fees during this period. With the influx of tourists and the need for efficient payment solutions during the World Cup, there may be opportunities for fintech companies and digital payment providers to innovate and offer convenient payment solutions. This can lead to advancements in Morocco's digital financial services landscape and promote financial inclusion.
Large-scale infrastructure projects related to the World Cup, such as stadium construction and transportation upgrades, may require complex financing structures. Moroccan financial institutions can participate in syndicated loans, project financing, and bond issuances to fund these projects, potentially leading to increased revenue for the financial sector.
A successful World Cup can contribute to Morocco's long-term economic stability. This stability can have a positive impact on the country's financial markets, making them more attractive to domestic and foreign investors. Stable economic conditions are conducive to investment and financial market development.
Hosting a major event like the World Cup also presents opportunities for the insurance sector. Insurance companies may see increased demand for coverage related to event cancellation, liability, and other risks associated with the tournament. This can lead to growth in the insurance industry and provide additional investment opportunities for financial institutions.
In summary, we can say that with careful planning and execution, Morocco has the potential to reap significant rewards from this global sporting spectacle.
Pr. Younes AIT HMADOUCH. Research-professor in Ibn-Tofail university (Kenitra-Morocco) and a PhD in Economics and Finance