Timothy Heritage and Keith Weir Sochi, Russia
HOSTING the winter Olympics at great cost in Sochi is unlikely to give the Russian economy a big boost, ratings agency Moody’s Investors Service said yesterday, 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 winter Olympics, which are expected to cost more than $50 billion (about R560bn) and have been marred by reports of widespread corruption and waste.
Moody’s said: “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.”
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 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 that 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.
Economists say the benefit of hosting major sports events tends to be fleeting. Britain got a short-term gross domestic product boost from staging the 2012 Games in London but the economy had gone into reverse again by the end of the year.
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.
Moody’s and Fitch Ratings, however, both said the Russian economy was big enough not to suffer a big setback. – Reuters