13 July,2010 11:40 AM IST | | Agencies
Spain, struggling with an unemployment rate of around 20 percent, hopes winning the World Cup for the first time will give its economy a much-needed boost.
Finance and Economy Minister Elena Salgado told reporters Monday that winning the World Cup "is good."
"It generates confidence in our country, here and abroad, and that will also be good for GDP," she added.
Her comments echoed those of Industry Minister Miguel Sebastian who said Thursday that if Spain won the final against Holland the government would revise its gross domestic product forecast for this year upwards.
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The government currently predicts that the Spanish economy, Europe's fifth largest, will contract by 0.3 percent on an annual basis in 2010.
The country's unemployment rate hit 20.05 percent in the first quarter, the highest level in the 16-nation eurozone and its highest reading since 1997 as the collapse of a property bubble continued to take its toll.
The rise in the number of people without work has fueled the expansion of Spain's public deficit as spending on jobless benefits soared.
It stood at 11.2 percent of output last year, the highest level in the eurozone after Greece and Ireland.
But some economists like Josep-Maria Sayeras of the Esade business school believe Spain's World Cup victory on Sunday with a 1-0 extra-time defeat of Holland may temporarily offer some relief to problems that ail the Spanish economy by shoring up consumer spending.
"It will aid consumption," he said.
The head of the Spanish Commerce Confederation, which represents nearly 450,000 retailers, Miguel Angel Fraile, said "consumption will certainly rise" but "we do not know by how much."
"When a society is happy, that always has repercussions on consumption," he told AFP.
An ABN Amro Bank study into the 2006 World Cup in Germany into the macro-economic effects of the tournament suggested a World Cup provided a GDP gain of 0.7 percentage points, a figure that many economists felt was too high.
One factor that could slow consumer enthusiasm is that the Spanish private debt is already high at 178 percent of GDP, and that the high employment rate should put the brakes on any spending spree.
According to research firm Nielsen, the consumer confidence in Spain reached a record low in the second quarter.
An economic sector that could reap benefits from the World Cup win is tourism, which accounts for nearly 10 percent of Spain's GDP. Spain is the world's third most visited country, after France and the United States.
"The victory is very positive for tourism," the executive director of the Madrid-based United Nations World Tourism Organisation (UNWTO), Marcio Favilla, told AFP.
"The positive image is reinforced ... it is very important," he added.
Cities like Madrid and Barcelona that are home to Spain's two biggest clubs, Barca and Real Madrid, should "capitalize as soon as possible" on this victory, said Favilla.
"It is a a good time to reinforce the image (of Spain) on international markets," he added.
Juan Carlos Martinez Lazaro, an economist at IE Business School, said the World Cup victory "is like a free advertising campaign."
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