World Cup boost to S.Africa growth likely modest

South Africa's economy will probably get a boost from the soccer World Cup, a Reuters poll showed.

World Cup boost to S.Africa growth likely modest

South Africa's economy will probably get a boost from the soccer World Cup, but the uplift may fall short of lofty hopes when the country first got news it would be host for the tournament, a Reuters poll showed.

With a little over two weeks to go until kick-off, football fever is growing in Africa's biggest economy. Spain has edged ahead of five times world champions Brazil as the tournament favourites, a separate poll of economists showed. The Reuters survey of 22 economists forecasting the event found a range of views, saying it would add between 0.1 and 0.7 percentage points to growth, with a median forecast of 0.3 percentage points, boosted by an expected 300,000 visitors.

The South African economy is expected to expand by 4.0 percent in the second quarter and 3.9 percent in the third, rounding off an average rate of 3.1 percent over the duration of 2010, the poll showed.

The biggest impact is seen in the current quarter, where the median forecast predicted a 0.5 percentage point boost to the economy. The tournament runs for a month, from June 11.

South Africa's economy grew by an annualised 4.6 percent in the first quarter, beating expectations, well ahead of the 3.2 percent expansion in the fourth quarter of 2009. That was partly due to preparations for the event.

"Although there will be a lasting positive effect on the South African economy via further infrastructure development, investment and tourism related to the World Cup, it is likely to disappoint from initial expectations," Noelani King Conradie, at NKC Independent Economists in Cape Town.

"The lasting effects of the global financial crisis and South Africa's image abroad as a dangerous crime-ridden country will be the biggest negative factors."

Indeed there are reasons for caution in predicting a large boost to the economy. Germany saw a jump in retail spending and services activity running up to and including the tournament it hosted in 2006 but also a sharp slowdown afterward.

"We had some investment in infrastructure before the World Cup, and tourists which came to Germany and a positive effect in retailing," said Stefan Muetze, economist at Helaba in Frankfurt. "But the net effect was relatively small."

Fewer visitors expected 

In-depth research conducted by Grant Thornton last month showed that 373,000 foreigners were expected to visit South Africa for the tournament, about 230,000 of them ticket holders.

But that was much lower than on earlier predictions of 450,000 overseas visitors and has left some economists more sceptical about how much of a real boost it will provide.

"The World Cup will probably have an impact on the economy, but by less than what was initially expected as the number of foreign arrivals (and estimated amount spent per traveller) looks set to fall short of expectations" said Jean-Francois Mercier, an economist at Citi.

Slightly more than half of the economists polled, 12 of 22, expected the World Cup to have a lasting impact on foreign direct investment.

Preparations for the World Cup, including billions of rands spent in constructing and upgrading stadiums and the country's transport system, helped create thousands of short-term jobs.

"Certain sectors like construction, hospitality and transport will benefit but exactly quantifying the influence will be difficult," said Salomi Odendaal at Citadel.

"The bigger impact may be on increased optimism among South African residents because of the 'feel good' factor."

Economists said the tournament is not expected to have a lasting impact on employment.

The poll showed unemployment at a median of 25 percent of the labour force in the third quarter, little changed from the first quarter of this year.

Forecasters on average expect the jobless rate to fall back to 24.3 percent of the labour force in the last quarter of the year compared with 25.2 percent in the first quarter.

Reuters

Last Mod: 26 Mayıs 2010, 18:12
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