Major sporting events are believed to boost host country’s economy. But this year’s Olympics at Rio de Janeiro which opened last week, analysts expect that the biggest sporting event might do more harm than good to Brazil’s already slumping economy.
Economists said that the effect of hosting a major sporting event is likely to benefit smaller economy where the surge of tourists and infrastructure investment could make a big difference, opposite to Brazil’s case where economy is already massive.
The Olympiad is seen to bring a 0.4% increase in inflation, a 5% increase in Rio-based companies filing for bankruptcy and a 12% increase in small business defaults, according to Euler Hermes, the world’s leading provider of trade credit insurance.
Looking back, the Korea Composite Stock Index climbed sharply 72% in 1988 Seoul Olympics, the S&P 500 rose 1.4% when games were held in Los Angeles while the Spain’s stock market raised an average 0.53% in 1992 in Barcelona. Brazil’s benchmark Bovespa surged 31% ahead of the games despite the major snob from investors due to Zika virus scare and the impeachment trial of President Dilma Rousseff but will not be enough to rejuvenate the struggling economy.
While American athletes are bound to repeat their dominance at the Rio Olympics on Friday, the US employment was early to make noise on Friday as it showed robust record which pushed US dollar and Dow Jones to close in bearish territory.
The US employment recorded 255000 jobs in July, a big leap from economists’ expectation of 188000, while the unemployment rate remained unchanged at 4.9%.
Dow futures gained 100 points, or 1.04%, to finish at 18543.54. The Standard and Poor’s 500 and NASDAQ were up 8 points and 21 points and last closed at 2182.72 and 5221.12 respectively.
The dollar index, meanwhile, recovered from its last week’s worst performance as it gained 0.48% to close at 96.24. The dollar rose 0.57% against the yen to 101.79 and was up 0.65% against franc at 0.98 and 1.11 against euro, up 0.34%.