IMF assesses economic impact of CWC: Don’t expect much from it

The April 2007 Regional Economic Outlook of the Western Hemisphere, recently published by the IMF produces what seems to be the first attempt at an overall assessment of CWC’s economic impact. empty-stands_thumbnail.jpgIt comments on “The Caribbean: Growth and Fiscal Effects of the 2007 Cricket World Cup”, where it states:

“The ninth Cricket World Cup (CWC), held in the Caribbean from March 5 to April 28, 2007, is the largest sporting event ever held in the region. Matches are taking place in nine countries, with semifinals in Jamaica and St. Lucia, and the final in Barbados. Organizers expect to sell close to 800,000 tickets, over 2 billion people worldwide to watch the matches by television, and about 100,000 additional (non-Caribbean) visitors to travel to the region.

Preparations for the CWC have led to accelerated economic activity in the region, particularly since 2005, but have been costly in terms of direct government expenditure and provision of new tax concessions. Five new stadiums were built and others were upgraded. Some of the stadiums were financed by grants—construction costs are estimated at US$250 million—and additional public expenditures were incurred on infrastructure (roads, airports, hotels, and marinas). Partly as a result of this expenditure, primary balances have deteriorated in most countries, and average public debt remained over 100 percent of GDP at end-2006 in host countries. There was strong expansion in private sector construction to increase tourism capacity, which is expected to continue into the medium term. Private investors have received generous tax concessions in most countries for such investment, which will erode the tax base going forward.

The long-term net impact of the CWC is unclear, especially in light of the associated fiscal costs. Studies of other states hosting large one-off sporting and cultural events (such as the 2003 CWC in South Africa and the 2002 FIFA World Cup in Korea/Japan) generally find a small net positive effect. The economic benefits of the 2007 CWC are likely to be diluted as the matches are spread across multiple countries, and are taking place in the midst of the peak winter tourist season when occupancy rates are already very high. In general, Caribbean public investment has shown a relatively weak link with growth, suggesting the need to increase the efficiency of these outlays.  Over the longer term, prospects for growth will hinge critically on the region’s ability to continue to market itself successfully as a tourist destination, to realize incremental revenues from the additional hotel rooms that have been constructed, and to address macroeconomic vulnerabilities, including high levels of public debt.

In case it’s not clear in IMF-speak, the bottom line is that the English-speaking Caribbean should not expect to see much by way of gains from the investment and spending associated with CWC.

This will not be sweet music to the ears of the public in many of the countries associated with the tournament, which is hobbling towards its semi-final stage after a series of setbacks on and off the field of play. Off the field, headlines have been taken by the possible murder of the coach of the Pakistan team, who might have been strangled: Jamaican police are investigating, with the aid of Scotland Yard and Pakistani officials. On the field, the early exit of supposedly top teams, Pakistan then India, sent potential game attendance, advertising revenue, visitor arrivals, and general competitiveness of the tournament into a nose dive. In addition, the lacklustre on-field performances of the host side, West Indies, make it unlikely that they will reach the semi-finals, and the crowds are likely to be smaller and atmosphere less animated for the latter stages of the competition.

windies-cricket.jpgIn many of the Caribbean countries there is hot public debate about how badly the tournament has gone overall, and what good can be salvaged before its end. Was the public duped by an overhyping of the possible good that CWC would bring? Will people feel that money was poorly spent to improve facilities that seem to have been little used so far? Has tourism suffered because of the tournament and can that be offset this year? Too early to have answers to these and other questions, but the media battles will be interesting as politicians seek to cover their backs, while International Cricket Council and Caribbean officials associated with negotiating the CWC deals scramble to explain that all was openly agreed by national governments and their representatives, so now is not the time to complain about the deals looking bad for the region. To use cricket jargon, it could be a long hot time out in the middle for those who have to bat, and the bowling will be very hostile.

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