A lighthearted look at the economics of the World Cup.

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June 13th, 2018
THE ECONOMICS OF THE WORLD CUP
Suttle Economics Notes #41
• FIFA’s 21st
World Cup starts on Thursday in Russia; Brazil to win at soccer, but lose in GDP
• The ascent of FIFA revenues reflects the rise of the Asian consumer—especially China
• Hosting the Cup can be bad for a country’s GDP and FX health, especially if they win
• Looking ahead to 2022 and beyond: The World Cup and geopolitics
The 21st
FIFA World Cup—soccer’s quadrennial
national team world championship—starts tomorrow.
The tournament will be held in 12 stadiums across 11
cities in Russia, with the Final in Moscow on July 15th
.
In this note, I look at three sets of issues that link the
World Cup to global economics and financial
markets. The links are tenuous, but writing this note is
my best effort to ease my conscience about watching
so much of the tournament over the next month.
First, I review the global economic significance of this
major sporting event. Second, I assess the impact of
the tournament on the host economy and financial
markets. Third, I look ahead and consider how the
World Cup might interact with global geopolitics in
coming years: in the Middle East in the build-up to
2022; North American reunification in 2026; and
when (not if) the World Cup goes to China.
Oddsmakers imply that Brazil (22%), Germany (20%),
Spain (15%) or France (13%) are most likely winners
(Chart 1). As in the world of politics, Brexit may be
delayed, but not avoided: a quarter-final spot seems
fair-value for England’s prospects. The red-line could
be a penalty shoot-out: England have lost all three to
date, while Germany are 4-for-4. Home country bias
gives Russia hope of getting out of the group stage.
Home country bias does not hold for Brazil, which had
nightmare tournaments at home in 1950 and 2014.
The greatest show on earth
The World Cup can justifiably claim to be the major
regular global media event in a world where the
production and consumption of global media
services is becoming an increasingly important aspect
of the service economy. It is a month-long event,
comparable to the Summer Olympic games,
although the latter has far more competing countries
and individual events. Despite this, however, the
World Cup can claim to garner more consistent
attention simply because its key moments—especially
the Final—appeal to a wider global audience (Chart 2).
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BZ GE SP FR AR BE EN PR Rest
Chart 1
Implied odds of winning
percent, as of June 10th
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02/04 06/08 10/12 14/16
NFL Superbowl
(4yr avg)
FIFA Cup Final
Olympics opening
ceremony
Chart 2
Global TV viewership
million

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June 13th, 2018
The record global TV audience (estimated at least 1.5
billion) watched the opening ceremony of the Beijing
Olympics games in 2008, underlining the importance
of Asia (especially China) as a consuming zone. This
also explains why the 2002 World Cup Final in Japan
attracted such a large audience. The NFL’s Superbowl
(and the NFL) suffer from a lack of globalization.
The World Cup also benefits from the fact that it is an
emerging market (EM) as much a developed market
game. Since 1930, the World Cup has been held in
EM economies almost as much as in DM economies—
a difference from the Summer Olympics, which are
geared more to higher-income audiences (Chart 3).
Some of the revenue generated by each World Cup
competition comes from ticket sales. Interestingly,
World Cup attendances have not risen materially in
the past 20 years or so (Chart 4). Indeed, the peak
aggregate attendance was recorded at the 1994
tournament in the United States (3.6 million) even
though there were fewer games there than in the five
tournaments since. The average gate at the 1994
World Cup was almost 69,000 (the next highest—
Brazil in 2014—was about 53,000). Larger stadiums
and the prospect of more games in a 48-team
tournament help explain why FIFA today voted to
hold the 2026 World Cup back in the United States,
Canada and Mexico (which will now get to hold its
third tournament—go figure).
The first six World Cups were goal-fests, with an
average of 4.3 per game, or one every 21 minutes—
enough to keep even US fans engaged (Chart 5). Since
1962, however, the average has settled down to 2.6
per game (a goal every 35 minutes). Attempts on goal
have fallen consistently. This speaks to the growing
uniformity of ability across countries. England did not
compete in the pre-war tournaments on the premise
that we were the world’s best (it was our game after
all; the winner would just play us for true legitimacy).
On our first try (Brazil in 1950), we were defeated 1-0
by an amateur team from the United States.
FIFA revenue in context
While ticket sales are important, FIFA’s main source of
revenue (at least on the books) comes from the sale
of broadcast rights and other marketing deals. Unlike
attendances, these have risen sharply (in USD terms)
through the past 20 years. FIFA revenues are best
looked at in four-year cycles (culminating in World
Cup years). In the latest complete 4-year cycle (2011-
14) revenues totaled $5.1 billion, of which $2.5 billion
was accounted for by TV rights (especially valuable in
Asia) and $1.6 billion by marketing deals with
corporate partners (Chart 6). In 2015-18, this total is
expected to be $5.7 billion; and, in 2019-22, the total
is projected at $6.6 billion.
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World Cup Olympics
DM economies
EM economies
Chart 3
Locations by economy
number of events
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Total attendance
Matches played
in tournament
Chart 4
World Cup attendances
million number of games
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Chart 5
Goals scored per game
number per 90 minute game

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June 13th, 2018
In the current cycle, FIFA revenue in 2018 is projected
to be about $3.9 billion (i.e. it averaged just $600
million in the previous 3 years). $3.9 billion is about
0.0045% of global GDP, which helps put the scale of
the competition in its true economic context. FIFA
revenues have been growing far more rapidly than
global nominal GDP over recent years, however (Chart
7). The nominal aggregate revenue gain (in USD
terms) for the 2019-22 cycle (when the World Cup will
be held in Qatar during the Northern winter) is
projected to be slower than the gain in nominal GDP
(in USD terms) projected by the IMF for that four-year
period (FIFA should invoice in non-USD currencies).
Watch for weak June data from Brazil
While the impact of the tournament on the global
economy is thus a (small) rounding error for GDP,
there are ways it might matter for the global data flow
in coming months. In South and Central America, live
TV viewership will be high during the work day.
Assuming that Argentina and Brazil progress deep
into the tournament, this could have a negative effect
on production indicators. In the past 3 World Cups
(2006, 2010 and 2014), Brazilian IP fell by an average
of 0.9%m/m, sa, in June. This was a much worse
outcome than surrounding months: the average for
Apr-May was flat and Jul-Aug posted an average
0.7%m/m, sa rebound. This could add to concerns
about the health of Brazil as it approaches elections.
Impact on the host economy and markets
The most plausible economic impact of the
tournament is on the host economy—Russia. Events
such as the World Cup can boost growth for two
reasons. First, there is a construction boost (both
stadia and infrastructure) leading up to the event. The
Russia World Cup Organizing Committee reckoned
that outlays between 2013 and 2018 boosted GDP by
almost a cumulative 1% point (while that might not
seem a lot, Russia grew only 3% in all between 2013
and 2018). This growth boost disappears on the eve of
the event. Second, there is a short-term infusion of
tourism spending from foreign visitors, although the
magnitude of this effect can be limited if event visitors
scare off other potential visitors (this happened at the
London Olympics in 2012). While hordes of soccer
crowds are indeed apt to scare competing visitors off,
I’m not sure how many might otherwise have been
hurrying to Volgograd (formerly Stalingrad) in June.
Empirically, hosting a World Cup has been bad for a
country’s growth health (Chart 8). This is even more
true if the host country wins (unlikely in 2018).
Hosting a World Cup has been even worse for a
country’s financial markets (using the FX rate as a
proxy; Chart 9). Host countries have experienced FX
devaluations in the calendar year following the World
Cup in six of the nine competitions since 1982. This is
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TV rights
Marketing deals
Chart 6
FIFA revenues
$ billion total over a 4yr cycle
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Chart 7
FIFA revenues relative to global GDP
thousandths of 1 percent, 4yr cycles
Welcome to
Qatar
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All tournaments since 1966
Home team wins (66, 74, 78, 98)
Chart 8
Growth performance of World Cup host
Median GDP growth, %y/y, T = year of tournament

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June 13th, 2018
much worse performance than in the year after a
Summer Olympic games. Three of the six
depreciations were in DM economies.
A pipeline model of winning the World Cup
There is a pipeline for the World Cup. Since 1977, FIFA
has held a U-20 World Cup; since 1985, it has held a
U-17 World Cup (both every two years). Last year,
England became the first country to win both
tournaments in the same year: watch out Qatar in
2022! Unfortunately, however, the statistical link
between winning competitions at the junior level and
senior level is weak (Chart 10). Nigeria and Ghana, for
example, have won eight junior World Cups between
them, but neither has yet progressed beyond the
quarter-final round at the senior level (which Ghana
reached in 2010). By contrast, Italy and Uruguay
combine to six senior World Cup titles, but none at
the junior level.
Geopolitics ahead
Looking ahead, there are three geopolitical issues that
could be important. First, Qatar 2022 is shaping up to
have major issues, given the current blockade (and
underlying animosity) between Qatar and the rest of
its Gulf neighbors (a Saudi-Iran match in Qatar would
be a doozy). Second, FIFA today awarded the 2026
World Cup to NAFTA just as US-Canadian-Mexican
political relations have plunged to a recent low.
Finally, and most interestingly, there is the issue of
when China enters the picture. After the US, China is
the main economic prize for FIFA. The 2030
(centenary) World Cup will most likely be held in
South America (jointly by Argentina and Uruguay—the
1930 hosts) or England. 2034 (or 2038) is thus shaping
up as the first year that China might host the Cup.
China might be competitive by then. It re-entered the
Olympic Games in 1984; 24 years later, it won most
gold medals at home (Chart 11). China’s very low FIFA
world ranking (which correlates inversely with their
Olympic performance) hit its most recent low in 2014;
the country could be at the other end of the spectrum
by the late 2030s. Once focused, China has scaled
most other global rankings in the past 40 years.
Philip Suttle
phil@suttleeconomics.com
202-378-6793
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Olympics World Cup
Year ahead
Year after
Chart 9
FX moves for host currency since 1982
median % ch versus USD (except US = DXY)
R² = 0.0549
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Chart 10
Senior and Junior World Cup wins
Senior cup wins
Junior cup wins
Brazil
Argentina
Nigeria
Germany
Italy
Ghana
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Gold medals (LHS)
FIFA world ranking (RHS)
Chart 11
Chinese Olympic & soccer performance
number of medals ranking (higher is worse)