Sochi 2014 -The Most Expensive Olympics Ever
From the negative publicity regarding the killing of stray dogs, the controversy regarding rights of LGBT people in Russia and the environmental and economic issues surrounding the event, this years Winter Olympic Games has not being free from controversies and concerns.
At over $51 billion, the Sochi 2014 Olympic Games are set to be the most expensive in history. The graph to the right shows both the projected budgets and budget overruns of all modern Olympic Games, which highlight the vast overspend by Russia for the 2014 sporting event. What is worse is that the Winter Olympics play host to only one-third of events compared to the Summer Olympic Games showing that each event at these games will cost £520million (almost four times as expensive as the events at the Beijing 2008 summer games).
Bearing in mind the large costs associated with these Games, the big question to ask is whether or not Sochi 2014 will boost the economy – at the time when Russia’s growth slowed down to only 1.3 per cent last year?
The Olympic Games have until recently being held by advanced economies. Breaking with this trend, the Olympics of the 21st century are increasingly held in emerging economies and as can be seen currently with Russia, emerging economies typically face higher costs of staging such events. This is due to the lack of technologies and management expertise available, as opposed to more developed counterparts such as London and Beijing.
On the other hand, the benefits may also be higher: from improved investor and consumer confidence to higher economic returns on the much-needed infrastructure.
Olympic Games almost never make money from the event itself: revenue from ticket sales, sale of broadcasting rights and sponsorship do not cover the costs. Sochi will be no exception. In fact, the accounting loss will probably be one of the highest on record, as average official ticket prices are generally lower than at recent events.
Even though the estimated costs may seem huge, they represent a relatively modest 2.4 per cent of Russia’s annual GDP (which now exceeds US$ 2 trillion a year). For comparison, the Greek Olympics of 2004 cost around 7 per cent of country’s annual GDP.
The event will not have a significant effect on government finances or Russia’s debt. With Russia’s economic growth rate being the highest in Europe, coupled with its $3.3 trillion 2017 economic forecast, it is no surprise that the Russian government took the opportunity to spend $50 billion to host the Olympic Games.