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 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
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

This US Epidemic Keeps Getting Worse

One in 4 Americans suffers from this condition More

How to Safeguard Your Mobile Privacy

As the digital world becomes more mobile, so too do concerns about eroding privacy and increased hacking More

'Desert Dancer' Chronicles Iranian Underground Dance Troupe

Film by Richard Raymond is based on true story of Afshin Ghaffarian and his friends More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Scientists Say Plankton More Important Than Previously Thoughti
X
George Putic
May 26, 2015 9:26 PM
Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video Scientists Say Plankton More Important Than Previously Thought

Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video Kenyans Lament Losing Sons to al-Shabab

There is agony, fear and lost hope in the Kenyan town of Isiolo, a key target of a new al-Shabab recruitment drive. VOA's Mohammed Yusuf visits Isiolo to speak with families and at least one man who says he was a recruiter.
Video

Video US-led Coalition Gives Some Weapons to Iraqi Troops

In a video released Tuesday from the Iraqi Ministry of Defense, Iraqi forces and U.S.-led coalition troops survey a cache of weapons supplied to help Iraq liberate Mosul from Islamic State group. According to a statement provided with the video, the ministry and the U.S.-led coaltion troops have started ''supplying the 16th army division with medium and light weapons in preparation to liberate Mosul and nearby areas from Da'esh (Arabic acronym for Islamic State group).''
Video

Video Amnesty International: 'Overwhelming Evidence' of War Crimes in Ukraine

Human rights group Amnesty International says there is overwhelming evidence of ongoing war crimes in Ukraine, despite a tentative cease-fire with pro-Russian rebels. Researchers interviewed more than 30 prisoners from both sides of the conflict and all but one said they were tortured. Henry Ridgwell reports for VOA from London.
Video

Video Washington Parade Honors Those Killed Serving in US Military

Every year, on the last Monday in the month of May, millions of Americans honor the memories of those killed while serving in the armed forces. Memorial Day is a tradition that dates back to the 19th Century. While many people celebrate the federal holiday with a barbecue and a day off from work, for those who’ve served in the military, it’s a special day to remember those who made the ultimate sacrifice. Arash Arabasadi reports for VOA from Washington.
Video

Video Kenya’s Capital Sees Rise in Shisha Parlors

In Kenya, the smoking of shisha, a type of flavored tobacco, is the latest craze. Patrons are flocking to shisha parlors to smoke and socialize. But the practice can be addictive and harmful, though many dabblers may not realize the dangers, according to a new review. Lenny Ruvaga has more on the story for VOA from Nairobi, Kenya.
Video

Video Rolling Thunder Run Reveals Changed Attitudes Towards Vietnam War

For many US war veterans, the Memorial Day holiday is an opportunity to look back at a divisive conflict in the nation’s history and to remember those who did not make it home.
Video

Video Female American Soldiers: Healing Through Filmmaking

According to the United States Defense Department, there are more than 200-thousand women serving in the U.S. Armed Forces.  Like their male counterparts, females have experiences that can be very traumatic.  VOA's Bernard Shusman tells us about a program that is helping some American women in the military heal through filmmaking.
Video

Video Iowa Family's Sacrifice Shaped US Military Service for Generations

Few places in America have experienced war like Waterloo. This small town in the Midwest state of Iowa became famous during World War II not for what it accomplished, but what it lost. As VOA’s Kane Farabaugh reports, the legacy of one family’s sacrifice is still a reminder today of the real cost of war for all families on the homefront.
Video

Video On Film: How Dance Defies Iran's Political Oppression

'Desert Dancer' by filmmaker Richard Raymond is based on the true story of a group of young Iranians, who form an underground dance troupe in the Islamic Republic of Iran. This is the latest in a genre of films that focus on dance as a form of freedom of expression against political oppression and social injustice. VOA’s Penelope Poulou has more.
Video

Video Turkey's Ruling Party Trying to Lure Voters in Opposition Stronghold

Turkey’s AK (Justice and Development) Party is seeking a fourth successive general election victory, with the goal of securing two-thirds of the seats in Parliament to rewrite the constitution and change the country's parliamentary system into a presidential one. To achieve that, the party will need to win seats in opposition strongholds like the western city of Izmir. Dorian Jones reports.
Video

Video Millions Flock to Ethiopia Polls

Millions of Ethiopians cast their votes Sunday in the first national election since the 2012 death of longtime leader Meles Zenawi. Mr. Meles' party, the Ethiopian People's Revolutionary Democratic Front, is almost certain of victory again. VOA's Anita Powell reports from Addis Ababa.

VOA Blogs

World Currencies

EUR
USD
0.9152
JPY
USD
122.70
GBP
USD
0.6494
CAD
USD
1.2374
INR
USD
63.925

Rates may not be current.