Economists see biggest WC impact with Italy as champions

Economists and accountants are watching the World Cup with a different perspective than most, seeing how the tournament will affect the worldwide economy.
 
"Is there any link between football and economics, or are we just finding excuses to have some fun?" asks Jim O’Neill, head of global economic research at Goldman Sachs, in the introduction to the investment bank’s 60-page report on the economics of the World Cup.
 
"We are convinced that soccer has an impact on the economy and therefore justifies some research effort," said Ruben van Leeuwen and Charles Kalshoven, authors of Soccernomics, published by the economics team at ABN Amro, the Netherlands-based bank.
 
Their research show that a World Cup-winning nation enjoys 0.7 percent additional economic growth compared over he previous year, as well as a boost to its stock market. ABN Amro holds Italy as a "favourite", that being the country whose victory would most benefit the international economy.
 
"From the perspective of the need for balanced world economic growth, a European country should win the World Cup," says ABN Amro. "A US victory would further skew the imbalance and an Asian victory could lead to an overheating of the region’s already booming economies."
 
A South American victory would not be bad for the world economy – but would not help it much either.
 
Of the five large European countries in the tournament, the two weakest economic performers in recent years have been Germany and Italy. So ABN Amro’s dream final would be between these two nations, with Italy as the winner because of its tougher economic record record. Germany enjoys a home advantage as tournament host anyway.
 
Italy did not appear to reap any direct economic benefit from the 1982 finals against Germany, remaining stagnated in recession. In 1983, however, economic growth accelerated.
 
The World Cup can impact positively and negatively. The setback is to productivity as employees call in sick or take off work early to watch games. But additional consumption provides a boost. A factor, especially in countries that progress to the semi-finals, leads to happier consumers, and those consumers tend to spend more.
 
The London-based Centre for Economics and Business Research estimates that the World Cup will boost the economies of participating nations by a net GBP 13 billion. It believes that Europe will reap GBP 11.3 billion because of increased consumer spending, especially in Germany.
 
Economic growth in football-mad South America will suffer because the damage to productivity caused by absenteeism will outweigh the benefits from additional consumption. South America is disadvantaged by its time zone as most of its teams’ matches will take place during the working day. In Europe, kick-off will usually be in the late afternoon.
 
Among economists in general, the odds-on favourite is Germany. As host country, Germany will reap a variety of benefits, including increased capital spending on its stadiums and transport infrastructure, more tourists and more employment. The German Chamber of Commerce expects the World Cup to create 60,000 jobs and boost national income by 0.3 percent.
 
Even economists, however, are more excited by the football than the numbers, which they acknowledge are comparatively small.
 
Mervyn King, Bank of England governor, recently pointed out that the main effect of the World Cup will be on the timing and pattern of consumer spending and not long-term. He argues that any boost is likely to be short-lived, as people bring forward spending from later in the year or decide to spend less on other things to compensate.
 
In the 1998 World Cup, hosted and won by France, domestic consumer spending rose sharply in the run-up to the tournament, only to drop back by 0.8 percent during the games before eventually recovering.
 
Because spending patterns can be distorted, economic trends may be harder to read this year. Lucy Hartiss of Capital Economics, a London-based consultancy, thinks the indirect effects of the World Cup are likely to have a much more significant and lasting influence on the German economy than the direct effects of tourism and consumer and capital spending.
 
"Hosting a major sporting event raises the profile, status and reputation of the host nation, providing a lasting boost to tourism and business investment," she said. "More immediately, it is possible the World Cup will provide a timely boost to German consumer confidence at a crucial stage of the economic recovery."

Source: euFootball.BIZ © Copyright 2006 - All rights reserved.