June 17th, 2010
04:46 AM GMT
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(CNN) – Whether it’s the Olympics or the World Cup, groups vying for prestigious sporting events always tout the economic impact of the games.

For example, a pitch by the USA Bid Committee to host the World Cup in 2018 or 2022 estimates that the games would have a $5 billion impact on the economy and add 65,000 to 100,000 jobs to the local economy.

But over time, what real impact does hosting the World Cup have on local economies? Not much, according to a study released last week by Daiwa Capital Markets.

Analyzing the 15 country economies where 18 World Cups have been held since 1930, the study found that the real GDP growth averaged about half percent a year.

But wait, there’s more – if  Uruguay, which held the 1930 World Cup, is taken out of the equation, the figures suggest the World Cup actually depresses the economic growth in the host country by 0.75 percent year on year, followed by a 1 percent recovery the year after, according to Daiwa.

Don Eggington, head of long-term analysis and modeling for Daiwa, concludes: “So, despite being the ‘World’s most widely viewed sporting event,’ the evidence suggests that the World Cup’s impact on the host country’s economy is too small to over-ride the other economic forces at work.

“As such, while South Africa is likely to reap plenty of publicity over the coming month, the evidence from previous tournaments suggests that the tournament will do nothing to boost growth, and hence nothing to tackle the enormous social problems that continue to confront the country.”

This reminds me of coverage (including our own) of whether Beijing would succumb to “the Olympic curse” after hosting the 2008 games.  Study after study shows that with few exceptions, the year after the games the host economies tend to fall, and the expected bounce in tourism thanks to the media exposure never materializes.

Three weeks after the close of the Beijing games Lehman Brothers went bust – igniting the “Great Recession” – so the “after” effect of the games in China may be hard to judge.

But if these studies are right, it makes one wonder why so much attention is paid to the economic impact of hosting large sporting events. Perhaps a jolt of pride and patriotism is more difficult to put a price tag on.

soundoff (10 Responses)
  1. Richard Zurba

    This World Cup will have a large number of foreign business people visiting and sub-consciously calculating what is possible for their businesses. The actual impact from investment or export led figures will come 3-7 years after the event (not 1 as Daiwa measures, but they may only be measunng the immedate spend not the economic spin-off from such an event). Economics doesn't create growth in an economy, people making decisions do – and international investment is overwhelmingly small and medium-sized company in nature these days, meaning that decision-makers are a broader group. Feeling comfortable in a country which has investment or partner-building potential is the key element to investment. Most of the business people that have come to South Africa to follow their teams are making a first trip to the continent of Africa. They will be surprised at the levels of efficiency, infrastructure and friendly hospitality and "can-do" nature of their business counterparts here. As well, the situation is different as mass media has taken many new forms that allow collateral information about a country to be available during the event. Our office is hosting business visitors from the USA, Singapore, Australia during this time – all of whom only came for the games, all of whom are first time visitors to the market with no particular business expectations. Developing friendships in a dynamic emerging market will create economic benefits through the years to come.

    June 17, 2010 at 7:44 am |
  2. Deepwater805

    So what you're saying is that any country who holds a World Cup is gonna be jinxed? I guess it's kind of Maddens NFL game curse huh?

    June 17, 2010 at 8:33 am |
  3. AaroninTw

    As in all things economic, it depends. I don't think enormous economies like the US and Japan, can expect a big boost from such things. However, the recognition that the games bring to smaller countries might be more significant than seen within the next year. Unfortunately, in the case of South Africa enough of the press seems to be negative to make me wonder if the impact won't be harmful over the long term.

    June 17, 2010 at 8:44 am |
  4. Guy Meintjes

    The one thing not considered here are the secondary benefits we as host have seen. Over the last few years SA has looked like a construction site with massive upgrades to our infrastructure. This has provided thousands of jobs and will in turn provide the backbone for future economic growth. We are still very much a third world country, and perhaps this is why the World Cup's aftermath may well be very much more positive than observed in other first world nations which didn't need the same massive 'upgrade'

    June 17, 2010 at 9:18 am |
  5. HijabGalore

    Gets to where the world cup will come with this time ... Need something different from last 40 worldcups ( winner... Korea)


    June 17, 2010 at 5:34 pm |
  6. RP

    I think the World Cup will bring growth to South Africa this time not because of the event but thanks to the big exposure of SA best features, versus it's previous exposure, being smaller than more publicity filled countries like Japan or Germany, or like in my case because of poor knowledge of their way or life or their features. I thought Africa more like the new continent but not as contemporary as it really is. I'm from Mexico and have never been to Africa, but I must say that after the world cup began, and I saw firsthand their culture, people and landscapes, I must say it's beautiful and I would work hard to visit sometime soon SA.

    June 17, 2010 at 6:21 pm |
  7. bendo

    As a South African, all I can say is, We've spent a ton of money on this event and could use a little appreciation for our good deeds and guidance on what we still have to deliver. Being a frequent traveller flying almost 120 flight hours a month, I have seen the impact of this worldwide and will stand by our government in saying this was worth the wait and worth the money. Changing peoples perspective is expensive and we've accomplished that hosting this event. This will in turn be a catalyst for our future development and FDI, after all your have to spend money to make money.

    So world, we say, we love you, is it not time to give us some lovin back?

    Proudly South African forever, no matter what!

    June 22, 2010 at 1:28 pm |
  8. Catalyst Learning Center - South Africa


    As a South African, i am some what ashamed to say that i too was very sceptical about our countries ability to host such a prestigious Event...that was until i attended the Nigeria vs Korea game in Durban....All i can say is well done to everyone that has made this happen! The stadium is majestic, the Camaraderie among the spectators is heart warming, the security and the management of the event was nothing short of superb – Well done Durban and well done South Africa and well done and thank you FIFA....

    I am not an economist, but one thing i do know is that "if If God is for us then who can be against us"

    If you (South Africa and Africa) continue in this same spirit and passion then in the words of one wise (and gorgeous) woman....ITS TIME FOR AFRICA.

    June 24, 2010 at 9:33 am |
  9. mrose

    This is the event that shows the world how far South Africa has come peacefully through a momentous and perilous historical period. I love the anti racism ads, I love seeing the pride of the people in hosting the event. These things are priceless.

    July 3, 2010 at 3:31 am |
  10. salma gul

    Gets to where the world cup will come with this time ... Need something different from last 40 worldcups

    October 25, 2010 at 6:07 am |

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