Spain hopes for economic boost from World Cup glory

Spain hopes for economic boost from World Cup glory

10th July 2010, Comments 0 comments

Economists hope a win over Holland could aid a "one-off" consumer spending and lift the country out of the doldrums.

Madrid -- Spain's glorious run to its first World Cup final has bolstered a sagging feel-good factor in a country that has endured some difficult economic times of late.

Economists now hope a win over Holland on Sunday can aid growth and lift the country out of the doldrums.

A win "could help consumer spending" but it would be "cyclical, a one-off," according to Josep-Maria Sayeras, economist with Esade business school.

Beneficial even if defeated
Juan Carlos Martinez Lazaro, economist with IE Business School, believes benefits could accrue from Spain's strong showing at the tournament even in the event of a defeat by the Dutch.

"Certain sectors of activity could benefit from the Spanish performances, such as hotelry (including bars) and commerce. More alcohol is being sold," he explains.

"Although we do not have concrete figures we are expecting a rise in consumer spending ... (including) on beer, given that football matches boost the number of people frequenting bars," the director general of Spain's brewers' association, Jacobo Olalla Maranon told AFP.

Not only that, but the Puente Robles firm which produces Iberian delicatessen items including a range of Spanish hams estimates demand has risen 64 percent in recent weeks as the Spaniards have steadily advanced at the World Cup.

External boost
Spain is certainly looking for a boost from somewhere, with the country struggling to pull out of a recession rooted in the 2008 implosion of a property bubble and an ensuing global credit crunch.

Public sector deficits have mushroomed to hit 11.2 percent of GDP while unemployment has rocketed to around 20 percent of the active population, damaging Spain's image within the eurozone.

Martinez Lazaro says while the World Cup per se might not have a "great impact" he believes it could go some way to restoring Spain's image.

An ABN Amro Bank study into the 2006 World Cup in Germany into the macro-economic effects of the tournament suggested a World Cup was not able to transform a recession into a boom.

But it conceded people "should not under-estimate the effects" on the overall feel-good factor in the host nation

Wednesday's semi-final win over Germany -- a repeat of Spain's triumph in Euro 2008 for the country's first international footballing silverware in four decades -- "will positively increase self-esteem and confidence in the country," Prime Minister Jose Luis Rodriguez Zapatero insists.

Problems run too deep
ABN Amro further calculates that "the winner of the World Cup benefits from an economic bonus worth an average 0.7 points of additional economic growth" over a year.

But Martinez Lazaro is sceptical in Spain's case, given its current economic travails.

"Spain's structural problems run too deep for a simple (football) victory to pull us out of that," he says.

The country managed anaemic growth of 0.1 percent of GDP over the first quarter of this year and that should revert to a 0.3 percent contraction over 2010 as a whole, according to government forecasts.

Economists are agreed that Spain must reform its labour market, slash its public deficits, boost competitiveness and revamp its financial system.

Overall, a World Cup triumph for Spain can "perhaps provide a ray of sunshine for a while as people dare to spend a little more," says Sayeras, who nonetheless concludes that "there are plenty of clouds on the horizon."

That would appear wise counsel as the ABN Amro growth data from 2006 could prove an exception to the rule.

After the 1974 and 1978 tournaments both Germany and Argentina, the winning host nations in those years, saw their economies suffer sharp falls in activity.

AFP / Fabien Zamora / Expatica

0 Comments To This Article