News / Economy

Moody's: Olympic Games Unlikely to Boost Russian Economy

A construction worker prepares to pain a wall ahead of the 2014 Sochi Winter Olympic Games at the "Laura" cross-country and biathlon centre in Rosa Khutor, Feb. 5, 2014. A construction worker prepares to pain a wall ahead of the 2014 Sochi Winter Olympic Games at the "Laura" cross-country and biathlon centre in Rosa Khutor, Feb. 5, 2014.
x
A construction worker prepares to pain a wall ahead of the 2014 Sochi Winter Olympic Games at the "Laura" cross-country and biathlon centre in Rosa Khutor, Feb. 5, 2014.
A construction worker prepares to pain a wall ahead of the 2014 Sochi Winter Olympic Games at the "Laura" cross-country and biathlon centre in Rosa Khutor, Feb. 5, 2014.
Reuters
Hosting the Winter Olympics at great cost in Sochi is unlikely to give the Russian economy a big boost, ratings agency Moody's said on Wednesday, undermining one of President Vladimir Putin's main goals at the Games.
 
Putin has staked his personal and political prestige on hosting a successful Games, and promised the vast sums spent on Sochi would turn the Black Sea resort into an attractive tourism destination and give the Krasnodar region around it a lift.
 
But Moody's said in a report that uncertainty over the long-term legacy overshadowed the benefits of the Games, which are expected to cost more than $50 billion and have been marred by reports of widespread corruption and waste.
 
“While the central government can comfortably accommodate its share of the cost, the reputational benefits of hosting the Olympics have been undercut by the high cost of the event and other bad publicity,” Moody's said.
 
Putin and his government have been banking on the Games giving Russia's stuttering $2.1 trillion economy a fillip but hopes that the Russian rouble would firm because of the so-called “Sochi effect” have proved unfounded.
 
The rouble is down more than 5 percent against the U.S. dollar since the start of the year and economic growth this year is expected to reach about 2 percent, much slower than in Putin's first eight-year spell as president until 2008.
 
Moody's said the Games would have a neutral impact on Russia's debt rating, that fiscal pressures on Sochi and the Krasnodar region would weigh on their credit profiles, and the outcome for Russian firms involved in the Games would be mixed.
 
State companies and private investors, including wealthy Putin allies who have sought political and financial benefits by investing in the construction of hotels and other infrastructure, may not cash in, Moody's made clear.
 
“The long-term gain depends on the hotel sector because the majority of the private investors invested in the hotel segment,” Sergei Grushinin, an assistant vice president and analyst at Moody's, told Reuters by telephone.
 
“It depends on the Russian government's efforts to attract new tourists to Sochi which we estimate need to increase by 2.5 or three times after the Olympics to ensure that the majority of the hotels are full.”
 
Such efforts would depend on Sochi being affordable and more attractive than European holiday destinations which are now preferred by many Russians and are well within their means.
 
State-owned banks that provided loans or invested in the equity of companies that helped transform Sochi from a Soviet-era resort into a modern sports hub would see a negative impact on their credit rating, the report said.
 
Little comfort for Putin
 
Economists say the benefit of hosting major sports events tends to be fleeting. Britain got a short-term GDP boost from staging the London 2012 Games but the economy has gone into reverse again by the end of the year.
 
Almost the only winners from Sochi will be global corporate Olympic sponsors such as Procter & Gamble and General Electric, it said. For them, the Games would have a positive impact on their credit rating because of deals they concluded giving them exclusive worldwide marketing rights for their products.
 
The report provided little comfort for Putin. He is in danger of failing in his goal of using the Games to show Russia is a successful, modern state.
 
His record on democracy and human rights has been under scrutiny in the run-up to the Games, and the reports of corruption and cronyism - which he denies - have cast the political system he created in Russia in a bad light.
 
Because of these problems, hopes of an economic lift for Sochi and the Krasnodar region look increasingly important as he tries to portray the Olympics as a success for Russia.
 
Putin has repeatedly underlined these goals since arriving in Sochi this week to host political leaders and Olympic chiefs.
 
“It is largely thanks to the Olympic project that this gem on Russia's Black Sea will be able to fully realize its cultural and tourist potential, to attract guests not only with its unique natural environment but by also offering substantial infrastructure and hospitality options,” he said on Tuesday.
 
Although there may be no big economic gains for Russia, Moody's and Fitch Ratings both said its economy was big enough not to suffer a big setback.
 
“Overall, the widely reported $50 billion costs relating to the Winter Olympics are less than 2.5 percent of our 2013 GDP estimate for Russia. With some costs privately funded, the impact on the sovereign's finances is minimal,” Fitch said.

You May Like

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. More

Video Sudan School Becomes Target of Aerial Attacks

Dropout rate at an all-time high in South Kordofan state because many schools have been destroyed during 3-year civil war More

Tennessee Songbirds Fly Coop Long Before Tornadoes Arrive

Researchers say birds apparently alerted to danger by sounds at frequencies below range of human hearing More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Sudan School Becomes Target of Aerial Attacksi
X
December 19, 2014 12:45 AM
The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Putin Says Russian Economy Will Emerge Stronger

Russian President Vladimir Putin has said his country's sinking economy will not only recover but also become stronger, despite falling oil prices and Western sanctions over Ukraine. VOA's Daniel Schearf reports.
Video

Video Detained Turkish Journalists Follow Teachings of US-Based Preacher

The Turkish government’s jailing of critical journalists has sparked international condemnation and is being seen as an effort to undermine the followers of an ailing Turkish preacher based in the United States. VOA religion reporter Jerome Socolovsky has more.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8140
JPY
USD
118.81
GBP
USD
0.6402
CAD
USD
1.1597
INR
USD
63.066

Rates may not be current.