Brazil 2014: Italy’s early World Cup exit likely impact on economy’s recovery

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Rome –   Italy was in mourning on Wednesday after a 0-1 2014 FIFA World Cup loss to Uruguay sealed its ignominious exit from the world’s most watched sporting event.

In addition to dashing Italy’s hopes for a second World Cup title in eight years, the loss is now likely to have a short-term impact on the country’s slow-moving economic turnaround.

“There is no doubt that there’s a wide but short-term impact from an emotional event like this,” Maria Rossi from the polling firm Opinioni told Xinhua.

Italy's goalkeeper Gianluigi Buffon

Italy’s goalkeeper Gianluigi Buffon

“When the national team wins in such a high-profile tournament, people feel more optimistic afterwards. They go out, spend more, and they feel better about the future. And of course the opposite happens with a loss,’’ she added.

Any downturn in economic activity could be bad news for Italian aspirations for an economic turnaround.

Italy’s economy has shrunk in per-capita terms every year since 2010, but there were hopes it would show positive growth this year.

In recent months, economic indicators have been mixed but improving.

ISTAT, the country’s National Statistics Institute, reported on Wednesday that retail sales rose 2.6 per cent in April, the last month with comprehensive statistics available, the best one-month figure since 2011.

Consumer confidence is showing signs of life in June, after falling in April and May.

But economic growth figures remain anemic, and unemployment levels, particularly among young workers, are still mired near historical highs.

U.S. ratings agencies like Standard & Poor’s and Fitch continue to say the outlook for Italy is negative.

This is in the face of bond yields, the most immediate barometer of the country’s economic risks as determined by investors, which remain near all-time euro-era lows, a very positive indicator.

“The consensus is that the economy is improving, but very gradually,” Javier Noriega, chief economist with private investment bankers Hildebrandt and Ferrar, said in an interview.

“It’s a like a slow turning ship and while a nice run through the (World Cup) tournament would have probably been a good thing, it’s hard to imagine the loss having more than a brief impact.’’

Noriega said Hildebrandt and Ferrar did a study in 2006 to determine the economic impact of Italy’s World Cup victory that year and the results were telling.

There was a flurry of economic activity for a few days after the final win.

Italians were spending money in restaurants and bars celebrating, buying souvenirs, spending a little more when it came to every day purchases, and so on.

But over time it more or less averaged out.

“Though the economic activity after the final was measurable, at the end of the year it probably added, at most, a tenth of 1 percent to the year-end 2.2 percent growth figure compared to the previous year,” Noriega said.

The medium-term impact of the early exit in this tournament will almost surely be smaller, according to Noriega.

“Sure, maybe people stay home more or spend less for the next two or three days,” he said.

“But then a few days after that they’ll realize they have a little more pocket money than they would have had otherwise and they’ll go out and spend it.

“Economically speaking, people have short memories for this kind of thing.”(Xinhua/NAN)

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