Paris 2024 Olympics: 3, 2, 1, get counting!
With less than 100 days to go until the beginning of the Paris 2024 Olympic Games, the calculations race has started. Whilst the Olympic motto is “Faster – Higher – Stronger,” the motto of the French public authorities could be summarised as “the Games must be self-financing.” This is partly true, if we consider the scope of expenditure as restricted to the organisation of the sporting events, 96% of which is financed by private funds. It is partly false, if you extend the scope to include infrastructure and peripheral expenditure such as public security. Public financing accounts for close to half of the budget for Paris 2024 – of a total estimated budget of EUR 11.8 billion, 42% comes from the public coffers, according to estimates from Asterès[1].
In any event, the Paris Olympic Games would win a medal for fiscal discipline. Between the bid and the Games themselves, even with an overrun of close to 50%, Paris 2024 has been one of the more disciplined hosts of the Summer Games: budgets have overrun by a massive 231% on average since 1960, according to research by the University of Oxford[2]!
There is also the question of the income generated. This is a tricky calculation, as the scope is hard to define and several effects often result in inflated figures: the substitution effect – residents of the Ile-de-France region would have carried on consuming without the Olympic Games; and the crowding out effect – the usual tourists will be avoiding the City of Light. Lastly, the multiplier effect declines as wages grow less than prices over the period. How can the image benefits for a region watched by the entire world for a fortnight be quantified? What will the impact be on the productivity of employees who are inconvenienced daily, or whose attention is distracted by a historic event? These are all questions that are difficult to model and thus measure with precision.
The initial forecast is for a negligible impact on French growth. Estimated at 0.4% in total and spread over several years[3], the addition to GDP will not have a major impact on the trajectory of growth in France.
One of the advantages that is highlighted is the limited environmental impact. Yet the aim of hosting the first Olympic Games with a positive environmental impact has been revised down, given the challenge of squaring the circle. The organisers now hope to run the Games with the lowest level of carbon emissions, targeting a halving versus the London 2012 and Rio 2016 Games. 95% of the infrastructure to be used either already exists or is temporary, placing the emphasis on recycling.
And what of the financial markets in all this? Could they see a boost from the Olympics? Academic research on the topic suggests that there is not a significant impact on the local market or on stocks with a direct link to the event such as construction, tourism, media or sporting goods companies during the fortnight of the Olympics. The only notable impacts are outperformance of the domestic market when the host country is chosen – 2017 in the case of France – and a fall of around 20% in stock market volumes, and of 30% in volatility. Turning away from financial markets, investors seem to reflect the popular saying that the most important thing in the Olympic Games is not to win, but to participate.
Final version of 19 April 2024, Clément Inbona, Fund Manager, La Financière de l’Echiquier (LFDE)