The direct impact on Qatar from a potential loss of the World Cup 2022 hosting rights is small, but the country's broader infrastructure pipeline worth $100 billion could face delays, a BofA Merrill Lynch Global Research report said.

This would be credit positive given potentially lower fiscal spending or more efficient use of capital, said the report titled: "BofA Merrill Lynch GEM Fixed Income Strategy & Economics – Qatar in Focus – World Cup capex woes overstated"

The Fifa panel investigating corruption and bribery allegations in the awarding of World Cups to Russia in 2018 and Qatar in 2022 said it would issue its report to the adjudicatory chamber in July.

The importance of the World Cup bid is that it provides visibility to the medium-term capex pipeline. It also provides impetus to the non-oil economy which would have suffered otherwise from adverse population dynamics after the completion of the LNG expansion, the report said.

A scenario where Qatar is stripped of hosting the World Cup would have some negative equity implications, the report said.

The direct World Cup-related spending (stadiums and hotels) is small at $16 billion (7.5 per cent of GDP, or an annual 1-1.5pc of GDP over the period). This would suggest a 0.5ppt annual drag on real GDP growth. "We estimate the multiplier effect is low (0.3-0.5) due to remittances, profit repatriation and capital goods imports leaks," it said.

"Assuming 50pc bank financing, this is just 5 per cent of system loans and impact on loan growth is thus likely to be modest.
However, the much larger ancillary infrastructure spending, which became prioritised with the winning bid, is much larger. Our five-year projected cumulative on-budget central government capex stands at $100 billion (which could represent around a third of total investments during the period). This pipeline would likely lose execution focus and face potential delays, in case Qatar is stripped from hosting the World Cup," said the report.

A breakdown of the ongoing and planned projects nevertheless suggests the pipeline would eventually proceed forward in some shape or form. Infrastructure projects, central to Qatar’s transformation vision, form the bulk of it and a number of megaprojects such as Lusail City, the metro, railway or seaport were planned independently of the World Cup, it said.

The impact from a World Cup cancellation is nominally credit positive given potentially lower fiscal spending or more efficient use of capital. The rally in the shorter-end of the curve has brought it to trade inside other less creditworthy emerging market countries but left the curve steep with respect to peers, it said. - TradeArabia News Service