Prospects for a Budapest Olympics

Budapest has the necessary qualities to win the right to host the Olympics, but the city - and the country - could not hold the Games in the condition they are in today, according to a study by PricewaterhouseCoopers (PWC). We spoke to the president of the Budapest Olympic Movement (BOM) and a sport economist.

© BOM

The idea of bringing the Olympics to Budapest first came up in 2002. At the time, the Ministry for Youth and Sport commissioned an impact study on the effects of a 2012 Budapest Olympics, but it was decided in 2003 to abandon the idea. But the BOM did not give up. In 2006, they updated the study, and concluded that Budapest had the wherewithal to host the Olympic Games.

PwC calculated in 2006 that, assuming average annual GDP growth of 4 per cent until 2020, preparing for and hosting the Games would cost Ft4,156bn ($26bn). Although this sum might look like a huge burden for Hungary, the study did not conclude that this would be an obstacle.

Since then, certain factors have arisen that would make it harder to host the Games. For one thing, the global and domestic economic environments have changed drastically: growth perspectives have declined, and inflation risks have risen. For another, the costs of the infrastructural, security and technological provisions needed to host the Olympics have risen dramatically.

So it's worth asking whether it would not be unrealistic to aim to host the games. Would it not be too much of a burden in an economic environment where budget cuts have slowed growth down and where necessary reforms are proceeding slowly and where real efforts are needed to restore investor confidence.

Economic growth is one such key problem. Although the Olympics have become among the most lucrative sporting events in the world - with the exception of Athens, all events since the 1976 Montreal Olympics have been profitable - the Bank of China has carried out a study showing that no host of the past 60 years has managed to escape without an economic slowdown in the aftermath of the games. Overall, it was found, host countries saw a fall in growth of 0.4 to 2.5 per cent a year over the eight years following the Olympics compared to the eight years that preceded the games. The biggest slowdowns were seen in the smaller host countries.

The costs of hosting the Olympics are another issue. Some argue that China's immense spending has set a precedent for the countries that will follow. China spent more - up to $60bn - on the Olympics than any country before it. The Bird's Nest stadium alone cost almost $500m.

This is around four times the sum spent on the 2004 Athens Olympics and about 1.5 - 2 times more than the budget PwC envisaged for a Budapest Olympics. China's investment will pay off, though - a 1999 study anticipated profits of $1.625bn. Spending on this scale is impossible for a small country, according to the sport economist Ferenc Denes.