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Poland and Ukraine have been pouring money into infrastructure investments in order to prepare for UEFA Euro 2012, the international soccer tournament that kicks off this weekend.In a recent note to clients, Société Générale economist Jaroslaw Janecki estimates that in Poland, “infrastructure projects add around 1.5% to the Polish GDP,” whereas in Ukraine, which took a significantly worse hit to growth than Poland in the wake of the financial crisis, investments in infrastructure have amounted to 8.3 per cent of GDP.
However, in Ukraine, the investments in infrastructure are unfortunately isn’t completely good news. Over half of the spending came from the government, which “significantly expanded budget deficits and contributed to the rapidly rising debt burden.”
In terms of one off sales, though, SocGen thinks Ukraine has a bit of an edge over Poland due to the fact that the “richest and keenest” soccer fans from the Netherlands, Germany, and England will all be playing the group stages in Ukraine, whereas four out of the five PIIGS teams (Italy, Ireland, Greece, and Spain) will begin in Poland. Ukraine also gets to host the championship.
Janecki also sees an inflation boost in both countries as a result of temporary fan spending while tourists are in town: he writes that the “EURO 2012 effect” could boost Polish CPI between 0.2 and 0.4 per cent, while in Ukraine, CPI could rise 0.4 to 0.6 per cent from one-off spending.
The SocGen note concludes by saying that “the best national teams could also influence sentiment in those countries.”
But Morgan Stanley doesn’t completely agree with that last statement. In a note to clients discussing Spain, Morgan’s analysts say that the idea “that a football championship, through the confidence channel, can visibly boost Spanish growth is too much to hope for.”
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