The economic impact for the winner of a World Cup…
The economic impact of football is a huge topic. A country’s victory at the World Cup means a lot to its people. But does it have an impact on growth? Economists speak of household confidence as a factor of both consumption and productivity. Are morale, hope, competition, and above all sporting victory ingredients for reviving an economy?
Although France did not win the 2022 World Cup in Qatar, they come out with the honors. The Blues made us dream. But it is Argentina who has just brought back the famous trophy in Buenos Aires. Now that the competition is over, let’s ask ourselves for a moment: would a victory or a final in the World Cup have influenced French growth?
The impact on household consumption
Photograph of the growth of a country, the gross domestic product remains, rightly or wrongly, the benchmark. French consumption represented 60% of GDP (gross domestic product) before the health crisis. It is therefore an important marker, even if it is lower than in the United States (70%). Consumer behavior, therefore, plays an essential role for economic actors. Without consumption, there is no growth. And without it, the deficit and unemployment increase. Domino effect, the consequences become social and societal.
With the FIFA World Cups from 1970 to 2002, for example, the winning countries achieved a growth increase of 0.7% compared to the years preceding the final. A small percentage qualify in the face of the moments of happiness brought to the populations of the winning countries. Household satisfaction and the confidence of business leaders pick up after a sporting event such as a World Cup or during the Olympic Games. Don’t we consume more when we are happy? Don’t we invest more when we are more confident?
The impact on the host country in 1998
France winning the 1998 final at the Stade de France, the host country of the event, had recorded a growth of 6% on an annual basis during the three months after its victory. There is always an impact on the organizing country, even if the investments made are amortized over the very long term. In the short term, “the influx of hundreds of thousands of spectators leads to a boom in consumption with, as a corollary, a temporary improvement in employment and new income from indirect taxation affirms » Paul Dietschy. Household consumption had then increased by 2.6% in the third quarter, after 0.7% in the previous quarter. Business investment had also been particularly dynamic (+6.6%) according to the Banque de France. Investors had taken more risk since they had confidence in the future of the French economy.
The 2018 World Cup
Twenty years later, France will repeat the experience by winning a second time the World Cup in Russia. On July 15, 2018, everyone is unanimous: the feat is deserved. What a competition! The Blues are stronger than ever, united in victory. We identify with the captain of the team. He is simple, approachable, and friendly. Even the managers of large companies recognize themselves in Didier Deschamps. France vibrates…only for a moment. The last goal was barely scored and what was called “the Benalla affair” broke out and began to loop on all the television channels, totally eclipsing the Football World Cup. Exit the outbursts of joy…exit aid for GDP growth. It works both ways. The media hype about the turpitudes of the Republic is not a potion to reinforce the joy of living.
Finalists and losers have a slightly negative effect on the economy
According to the analyzes that have been carried out for fifty years, the economic growth of the world champion countries is significantly better than that of the losing finalist countries. Which seems logical.
Additionally, losing teams in World Cup Finals have typically suffered a decline in growth, sometimes as much as 0.3% from the previous year’s rate! Admittedly, it’s a negligible quantity… in short, it’s better to win.
Winners and losers, everyone wins
Some business sectors are still benefiting from the World Cup effect. On match nights, some bars and brasseries in France see their turnover increase by 30% on average. This percentage naturally varies according to the city, the location, and the size of the establishment. Delivery platforms are also working at full speed, especially when the weather becomes less clement. Sports equipment manufacturers such as television screen manufacturers are achieving record sales. Manufacturers of by-products (French flags, T-shirts) are seeing their sales increase. These activities only experience such growth during the sporting event. It can last several weeks if the team wins the World Cup
What impact for Argentina?
Football is the most popular sport in Argentina. Lionel Messi joins Argentine football god Diego Maradona. A page went down in history on Sunday.
Argentina’s victory in Qatar could add 0.1% to its GDP thanks to increased domestic consumption. Why so little? You should know that the Argentinian GDP is four times lower per capita than that of France. It stands at 10,720 dollars per inhabitant against 43,519 dollars for France in 2021. Argentina is still going through an economic crisis, in fact for 20 years. With an inflation rate of 88% (October 2022), the economy is unbalanced. Argentina’s debt is $45 billion according to the IMF. Although it represents only 55% of the country’s GDP, it has been in default on interest payments on its debt since May 2020.
Faced with the victory against France on Sunday, December 18, 2022, in Qatar, Argentines will continue to frequent restaurants more than ever and spend their money rather than saving. Why save in an economy impacted by such inflation? Nevertheless, the Argentine economy could take advantage of the victory to improve its image and bring in more tourists in 2023. Argentina will return to the image of a welcoming, festive, friendly country with magnificent landscapes. This influx of foreign currency will not reduce the 33% of Argentines who still live in poverty, nor will it help to develop Argentina’s industrial sector, but it is at least a positive factor.
The victory and its positive effects on the population
The effect of winning a World Cup on a population is above all psychological. It is difficult to quantify since the economic, political, and geopolitical context evolves like the expectations and way of life of a population. The economic and financial environment of 2022 does not resemble that of 2018 and even less that of 1998. The victory effect nevertheless makes it possible to mitigate the problems encountered. And the latter have been numerous for two years for Argentina as for France with the health crisis and the inflation of consumer goods. The energy dependency rate was 13% for Argentina compared to 44.5% for France in 2020. Victory always brings a positive psychological element to its population and to all economic players, even if it remains temporary.
restore hope
Even if there is an element of irrationality in the economy, the psychological effects are not strong enough to transform a country’s crisis into a revival of activity and consumption. Winning a World Cup or reaching the second podium nevertheless strengthens the image capital of the winning or finalist country. It also gives hope. And hope is priceless when a population needs optimism. Which is currently the case with Argentina. In a globalized context and weakened by the consequences of the health crisis and the surge in the price of raw materials, the confidence of consumers and investors remains more relevant than ever to support a country like Argentina and even France. .
