Economists predict little Olympic economic impact

Economists predict little Olympic economic impact

Economists predict little Olympic economic impact

Updated 19 December 2011, 13:38 AEDT

The Olympic host China is on track for a record gold medal count in the Beijing Games, but it appears any gold win for the economy is far from certain.

Despite the spending of a record $US43-billion dollars, more than five previous Games added together, most economists forecast at best a neutral effect on economic output.

Economist Stephen Green, Asia Economist with Standard Chartered in Shanghai, has told Radio Australia's Connect Asia program for just 15 days of main events, that breaks down to almost $3 billion a day or $140 million per event.

"As far as the spending goes it's really a drop in the ocean in terms of China's total investment each year," he said.

"From an economic perspective we'd argue that there's neither a positive nor a negative benefit to this spending.

"Just because the Olympic Games finish in a couple of weeks time doesn't mean that investment is going to crash in China - there's no consumption boom associated with the Olympics either so consumption isn't going to collapse either. It really has very limited economic significance".

A Goldman Sachs report published in Hong Kong forecasts a slowdown in the months of August and September during the Olympics and Paralympics.

The report notes the drag on economic activity is likely to be short term as a result of restrictions on construction, factories, cars and mining to cut pollution.

But on the straightforward economic front China has other problems to worry about, with a five per cent drop in Monday's stock market following a similar drop on Friday

Stephen Green says as elsewhere, inflation and slowing growth will remain the big issues after the excitement of the Games has faded.

"Obviously we've had a blistering few years of growth over the last five years, but as the global economy slows then China is necessarily going to be impacted," he said.

"China has to find a lot of jobs for the people coming out of its schools - that really means that as China's economy does lose some momentum from the export side it's really important that the service sector is opened up and here we're talking about financial services, talking about logistics, telecom, entertainment.

"These things can be big job creators, but at the moment a lot of these sectors are fairly restricted".

You can find the full story at the Connect Asia website: http://www.radioaustralia.net.au/connectasia

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