Destinations Central & South America

Economists Predict Only Modest World Cup Bump for Brazil’s Economy

May 17, 2014 3:00 am

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FIFA Secretary General Jerome Valcke (L), former Brazilian striker and member of the 2014 World Cup local organizing committee Ronaldo (2nd L) and Luis Fernandes, executive secretary of the Ministry of Sports, look on during a visit to the Maracana Stadium in Rio de Janeiro May 15, 2013. The stadium will host games for the 2013 Confederations Cup and the 2014 World Cup. Ricardo Moraes / Reuters


The World Cup will give Brazil’s sluggish economy only a modest boost, if at all, although it should improve the country’s reputation for business and tourism, despite construction delays and fears of social unrest, a Reuters poll found.

The month-long tournament will probably add just 0.2 percentage points to Brazil’s economic growth this year, according to the median of 116 estimates in a global sample of economists polled this week.

Such a small fillip will not be enough to lift Brazil’s economy out of its four-year-long malaise.

Brazil’s GDP is expected to grow just 1.7 percent this year, according to a weekly central bank poll, less than a quarter than the breakneck 7.5 percent pace in 2010, when the World Cup last took place, in South Africa.

Pessimism over economic benefits from hosting a World Cup contrasts with early government forecasts accounting for the arrival of 600,000 foreign tourists and massive investments in airports and public transportation – many of which have not been completed.

Brazil will also host the 2016 Olympic Games in Rio de Janeiro, though preparations for that event are also behind schedule.

The World Cup tournaments in South Africa and Germany as well as the London 2012 Olympics offered evidence that economic gains from hosting major sporting events are usually overestimated. Brazil should be no different.

“Most of the World Cup impact is already behind us,” wrote UBS economists Guilherme Loureiro and Thiago Carlos.

A similar Reuters poll calculated that the World Cup would only add about 0.3 percentage point to South Africa’s 2010 economic growth. That turned out to be roughly correct, as estimates by Citi economists after the fact put the impact at 0.3-0.5 percent on 2010’s second-quarter growth.

There are some signs that the economy might even take a hit. For example, there are still plenty of available hotel rooms in host cities, even in Brazil’s financial capital, Sao Paulo, which will host the opening match.

Airlines see demand for flights in June and July falling instead of rising, as business travelers reschedule to avoid the period, and retailers fear public holidays in some cities for Brazil’s matches could shut stores and hurt sales.

“Most of the local houses, including ourselves, are not including any effect of the World Cup in our growth scenarios,” said Marcelo Kfoury, Brazil chief economist with Citi.

Despite disappointment over the economic benefits of the World Cup, Brazil is still in a good position to win the trophy, the same economists said in a separate poll featuring their soccer forecasts.

The event is also likely to open some doors abroad for Brazil, despite fears that massive demonstrations could disrupt the tournament.

Thirty-three out of 117 respondents said the Cup would improve Brazil’s reputation among businesses, tourists and investors in the long term, while 19 saw a negative impact. The remaining expected a neutral effect.

“The negative publicity generated by massive protests, police crackdowns, and images of falling cranes and half-built stadiums will partly be offset by what is likely to be a successful football tournament against all the odds,” said James Lockhart Smith, an economist with Maplecroft.

(Click here for poll on financial analysts’ forecasts on World Cup results: ) (Polling by Siddharth Iyer and Kailash Bathija; Editing by Ross Finley and Toby Chopra)

Copyright (2014) Thomson Reuters. Click for restrictions

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