Brazil 2014: Italy's early World Cup exist likely impact on economy's recovery

 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.

“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.