July 13, 2010 12:31
Spain's World Cup triumph seems to have improved the global economic outlook for the second half of this year thanks to a perceived correlation between winning at football and the recovery hopes of the country's ailing economy.
A study of the economic growth rate of the winners of the World Cup in the last two decades shows that five -- except for 1998, when the whole of Asia was hit badly by the economic crisis -- saw growth soar compared to the year before their victory.
Argentina, the 1986 winner, recorded an impressive 7.1 percent of economic growth. Germany (1990) posted 5.7 percent, up 1.8 percent from 3.9 percent the year before. Brazil (1994 and 2002) saw 5.9 percent and 2.7 percent, up 1 and 1.4 percent. And 2006 champion Italy recorded 2 percent growth that year, up 0.66 percent from 2005.
The reason why the World Cup serves as a stimulus for economic growth is because it improves consumer sentiment and invigorates domestic spending on alcohol, clothes and sports. That is why market watchers think Spain's triumph in South Africa over the Netherlands' is the better result. Spain was one of the so-called PIIGS (Portugal, Ireland, Italy, Greece and Spain) thought to be in the worst trouble in Europe this year. So if a widely anticipated crisis were to happen in Spain, whose economic scale is much greater than Greece's, the repercussions would be devastating.
Spain's economy shrank 3.6 percent last year, and many predicted that it would contract a further 0.3 or 0.4 percent this year, the only negative figure among advanced economies. But now there are hopes that Spain's World Cup win can help the country do better.
The vibe is already being felt in the Spanish stock market. Spain's IBEX 35 index has been on a mini rally since Spain beat Paraguay to advance to the semifinal in July 3. The country's victory is also expected to have an indirect positive impact on the Korean stock market as well as it would improve investment sentiment to a certain extent.
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