The economics of the World Cup

The Momentum UK Team 17 June 2014

The World Cup inevitably shines a spotlight on a whole host of global social and economic issues, but what can a country’s economics tell us about its chances on the pitch?

The Debt Advisory Centre has grouped all 32 teams competing in this year’s tournament according to their national debt levels, with some surprising results.

Japan, a country known for financial discipline and its innovative technology industry, is an example of how unexpected bills can lead to excessive borrowing. The combination of the Fukushima nuclear disaster and clean up, along with an ageing population, has hit the country’s finances hard. Japan now has the highest ratio of debt to GDP, coming top of the table at 226.1%.

By contrast, Russia has the lowest ratio of debt to GDP of all the World Cup nations, but this isn’t the end of the story. Russia’s low borrowing levels are partly due to the fact that they defaulted during the 1998 “Ruble crisis” which left them unable to get credit for many years – highlighting the damage a bad credit rating can do. Russia now relies on its natural resources to raise revenue.  Track your spending with MoneyHub

How do the favourites compare?

How do the World Cup favourites compare economically? Italy won the tournament in 2006, but their national debt stands at a less-than-ideal 133% of GDP, behind only Greece and Japan. The current holders of the trophy, Spain, are still in the midst of a financial crisis, with a debt to GDP ratio of 93.7%. The UK (represented in the World Cup by England) is close behind, with a ratio of 91.1%.

Of the favourites to win, host nation Brazil has the lowest debt to GDP ratio at 59.2%, followed by Uruguay at 62.8%.

What does all this mean?

The World Cup is hard to predict – that’s what makes it so exciting! In other sporting events, a team’s wealth can be an indicator of the outcome; football clubs often depend on wealthy owners for success, and in the Olympics national income and investment in sport plays a huge part. However, some of the strongest teams in the World Cup have the weakest economies. Brazil are widely tipped to win, despite being in the grip of a recession and mass protests at perceived corruption and government overspending. At the other end of the scale, the USA – a global superpower with a huge population and economy – may not make it out of the group stage, and China failed to qualify.

Economists have agonised over theories and algorithms, but it appears that when it comes to predicting the World Cup winner, economics is about as useful as a psychic octopus.