Russia is counting on big returns from its Olympics investment, which transformed the Black Sea town of Sochi into a full-scale winter resort, Deputy Prime Minister Arkady Dvorkovich said.
“The economic gain is huge,” he said today in a Bloomberg Television interview with Francine Lacqua and Ryan Chilcote at the World Economic Forum in Davos, Switzerland. Direct spending for the games was “only $7 billion,” while an overhaul of the region’s infrastructure pushed the total to about $50 billion, he said.
Russia, which will host its first Winter Olympics next month, is pushing to dispel criticism of cost overruns and ease security concerns as government and finance leaders convene in the mountain retreat of Davos.
Russia now “has the best resort” it has ever had, Dvorkovich said. “Every country hosting the Olympic Games knows what it’s about. It’s about security, it’s about the quality of services, it’s about logistics, and it’s about good weather, if you’re talking about Winter Games in particular.”
All possible safety measures have been taken and 40,000 security workers are at the site, Dvorkovich said. Russia has been cooperating with foreign partners as well, he said.
President Vladimir Putin discussed Olympics security with U.S. President Barack Obama in a telephone call yesterday, according to a White House statement. The Pentagon, which has drafted contingency plans for the games, offered to provide Russia with high-tech equipment, including gear designed to detect homemade bombs, according to two Pentagon officials.
Hosting the Olympics will provide an “immediate positive effect” for Russia, Ashot Tsharakyan, an economist at Moody’s Analytics in Prague, wrote in a report yesterday. The games start Feb. 7.
“In the longer term, hotels, roads and other infrastructure built for the games may help attract more foreign tourists to the seaside resort,” Tsharakyan said.
The central bank also predicts an Olympics boost. The surplus in Russia’s current account, the broadest measure of trade in goods and services, should improve in the first half of this year thanks to the games and seasonal factors, policy makers said in a report Jan. 17. The surplus tumbled 54 percent last year to $33 billion, according to a preliminary central bank estimate.
Russia will benefit from a large inflow of tourists and demand from services in Sochi, though it’s “hard to say” how broad the effect will reach, Economy Minister Alexei Ulyukayev said in an interview today in Davos. The government will need to make sure the infrastructure it built is put to good use after the games are over, he said.
The government is trying to revive growth after the economy’s expansion slowed to an estimated 1.3 percent last year, the weakest pace since a 2009 recession. Dvorkovich, 41, said weak growth in Europe and deceleration in China, Russia’s two biggest trade partners, are an obstacle to expansion.
“We have some specific domestic issues that we have to resolve related to the investment climate,” Dvorkovich said. “We need to improve the judicial system, we need to improve government regulations and that’s what we’re doing.”
To ease travel for Europeans, the government would be ready “tomorrow” to lift visa restrictions after the Olympics if the European Commission were ready to reciprocate, he said.
Russia’s dollar-denominated RTS Index (RTSI$) of 50 stocks slumped 5.5 percent last year, while the Standard & Poor’s 500 Index advanced 30 percent for its biggest gain since 1997, according to data compiled by Bloomberg.
“Big companies are quite positive about Russia,” Dvorkovich said. “Stock market investors are not always happy. And it depends a lot on the stability and transparency of legislation and law enforcement.”
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