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Germany is hosting the World Cup for the first time in 32 years. Fans the world over will be travelling to Germany to support their national teams playing at soccer stadiums around the country. The World Cup does not start until 9 June, 2006, but, for soccer fans, its kick-off was on December 9 when the fixtures were drawn. Here we note that hosts Germany will meet Costa Rica in the opening match in Munich on 9 June.
As expected on 9 December the World Cup draw drew thousands of soccer fans .They waited in awe waiting for the draw of games at the eastern German city of Leipzig. This established the eight groups of teams for the first round of the competition. The 2006 tournament’s 64 matches in 12 German cities begins next year in Munich on 9 June with the final in Berlin on 9 July. Will this create a business bonanza some may ask? Suffice to say that the sale of television broadcasting rights for the FIFA World Cup Germany 2006 has already generated over USD1.7 billion for the games.
British fans were delighted that their team was ranked second in the seedings just behind Brazil. England will meet Paraguay in their opening match in Frankfurt on 10 June. But who are the favourites to carry the trophy this time? The odds are saying that the favourites in order of merit are Brazil, Argentina, Germany, England, Italy and France. England Captain David Beckham said his squad would determine their own fate and stand a superb chance of going all the way. “If we work hard and play to our potential we have a genuine chance of winning the World Cup.”
Apart from the usual high rankers we also notice new entrants such as Iran. Iran has ranked nineteenth while Tunisia is the only African team not among the last group of seeds. Naturally with six months to go until the FIFA World Cup starts, it is very difficult to make an accurate prediction.
A lot of things can still change but Brazil already look to have a very strong team. Germany has already had a taste of World Cup euphoria at the recent eight-nation Confederations Cup. The “mini World Cup” and the German national team’s zestful performances under coach Jürgen Klinsmann has helped send season ticket sales soaring to record levels.
Commentators say Jürgen Klinsmann and the German team can count on sell-out crowds of thousands of adoring supporters even though in their group they aren’t facing the world’s most dangerous teams. But German soccer fans will no doubt be willing to line up for tickets to a number of other games between the tournament’s top sides as well. So the magical question to ask is whether the euphoria about the games improves business perceptions at least in Europe. Many contend that the sluggish European economies have been long waiting for such a boost to rally their growth rates. Certainly the year 2006 will be better for the German economy, with domestic consumption being driven by the World Soccer Championship and the 2 per cent VAT increase at the beginning of 2007. This is the prognosis of Deutsche Bank Research, a leading think-tank for trends in business, society, and the financial markets. In the opinion of other financial observers they all agree that Germany will stand to benefit mainly because the competitiveness of German companies operating internationally has concurrently been improving. In particular, German companies are now offering the right products to emerging markets of the world. Costs, which were long too high, have been brought under control and further adjusted downward to buttress the 15 per cent drop of the competing dollar currency in 2005.
The EU autumn forecast projects for 2006 and 2007 indicate a marginal strengthening of GDP growth to 4 per cent and 4.2 per cent respectively. Since the European economy is expected to grow at a faster rate in 2006 and investment is especially strong in the commodity-exporting countries, therefore one expects orders for German machinery and plants to rally. This will translate into a sustainable impetus for booming German exports, even if international economic activity eases and the US dollar may continue to devaluate in 2006.
Back to Malta, the 2006 budget projected a 1.1 per cent growth next year. This was purposely scaled down on the expected slower growth of our main European clients such as France and Germany. The impact of the upward growth in the European economies especially that of Germany will slowly improve our exports and after the games in July provide more impetus for tourism inflows. Unemployment rose due to the Denim and Lloyds closures but now as a result there is more emphasis on attracting sustainable investment in the higher value added manufacturing sector .One hopes new factories will make up for such redundancies in the short term.
During Christmas, members of GRTU reported lower sales. One expected households to economise by cutting expenditure on non-essential goods. This was mainly due to the perceived economy drive to cushion the utility and fuel surcharge. Naturally domestic business in 2005 was not salutary but one hopes that confidence will pick up slowly next year. The effects of the oil surcharge and the 3 per cent increase in VAT has by now started to jack up the cost of the shopping list. Although inflation in mainland Europe is under two per cent, it comes as no surprise that our inflation rate has continued to edge upwards reaching 2.93 per cent by the end of December.
On the other hand GDP growth is conservatively projected to improve by 0.7 per cent in 2006 and then to reach a higher level of 1.1 per cent in 2007. Coupled with the modest improvement in GDP growth we notice how tourism, as the second pillar of the economy, slowed down in 2005 with a drop resulting mainly from mainland European markets albeit a welcome improvement from the British market.
During the past three years our main tourist markets in Europe were facing economic problems of their own and our delay in restructuring of MTA did not help. Otherwise there is a consensus for an optimistic revival in 2006 particularly in the cruise liner business. Dr Gonzi as the minister of finance is keeping a straight face hoping that our fragile economy may be spared the turbulence that is affecting the world around us. Having said this Malta Enterprise continued to venture forth on its drive to attract new comers investing in the IT revolution and encouraging more pharmaceutical industries. Let us hope that in 2006 these initiatives will consolidate their efforts to attract more IT related business and help brand Malta as a centre for IT excellence.
Considering that we are now in the shadow of world cup fever one may be permitted to forget our economic worries and hope that the football euphoria in Germany makes us stop thinking about the negative sentiment which has enveloped us during the Yuletide season.
Can the euphoria of football help turn round the mindset which has so far retarded business growth and limited the creation of new sustainable jobs? The answer can be found in reading the forecast by the Kiel Institute for World Economics. This is one of six economic think-tanks that provide forecasts for the German government and is raising its estimates for economic growth in Germany in the midst of the football fever, expecting real GDP to increase by an additional 1.5 per cent in 2006. For Malta’s economy, we are waiting eagerly for this shot in the arm… so set the games in motion while we look positively to a prosperous 2006.
Happy new year to all readers.
George M. Mangion
info@pkfmalta.com
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