Introduction:
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After every four years the world celebrates the
mega event called the Olympics. This event is
one of the major events in the world of sports
and dates back to 776 B.C.
With an event such as this there is bound to
be some economic ups or downs to the country that
hosts this event. The city in which the games
are to be hosted need considerable planning for
this mega event. Accommodations and Communications
are some of the main things that need to be looked
into.
In order to understand how the event will effect
the hosting city we will first take a look at
the preparations for an Olympic event then have
a look at the past Olympics events and the effects
it had on those cities and then finally come to
a conclusion.
It is important here to differentiate here whether
the finances needed for the hosting of the Olympics
event can be related specifically to the budgetary
balance of the hosting city’s budget and
whether the cost can be made up by the revenues
generated from the events. The funding impact
of the events can be summarized in three phases
1. Pre-Games impact
This refers to all the expenditures that are made
before the games can be held, these include preparatory
expenditures and other activities that are required
to host the games, investments etc.
2. Games impact
This refers to all expenses made during the time
that the games are taking place.
3. Post-Games impact
This is the long term impact of the games that
can at least last for ten years which is more
commonly known as “Olympic legacy”
One thing that is common in between these phases
is the amount of tourist that visit the city.
Visitors which are directly influenced by the
games are athletes, coaches referees and coaches,
spectators and the media.
While the host country faces many costly expenditures
these expenses are very fruitful as the hosting
country would benefit from these infrastructure.
When weighing up the additional costs of hosting
such an event a point that should be considered
is whether this infrastructure could generate
great benefits for the city. This is what we would
call an “opportunity cost”
The macroeconomic effect of hosting the Olympic
Games received little serious attention prior
to the first economic impact study conducted for
the Los Angeles Games of 1984. Interest in the
wider economic effects of
Hosting the Olympics developed after the city
of Montreal declared a considerable financial
deficit from the 1976 Games, (although it should
be noted that this refers only to the direct financial
effects of the Games, not their overall economic
impact). The Montreal Olympics were financed almost
entirely with the city’s own public funds,
with a considerable amount spent on improving infrastructure
and sports facilities in a relatively small area
of the city. Such was the extent of the ensuing
budgetary shortfall that Montreal’s taxpayers
are still paying a supplementary tax on tobacco
that is not expected to pay off the Olympic deficit
until 2005/6.
The Athens Olympics 2004 operating expenses was
estimated at 500 million Euros but the cost had
grown up to a close 2 billion Euros. The state
only covered 14% of the total costs. These expenditures
were concentrated in the years 2003 and 2004,
this has contributed to the widening of the governments
budget deficit. The deficit faced by Athens in
2002 was 1.4% of GDP but then in year 2003 this
rose up to 3.2%. The European Commission had predicted
in its Spring 2004 forecast that the deficit would
remain at 3.25 of GDP in 2004 before it falls
back to 2.8% of GDP in 2005,assuming that the
growth of the GDP is 4% in 2004 and 3% in 2005
there would certainly be risks that the GDP would
remain above 3% of GDP if the economy slows down
after the events of the games.
In 1999 a study done by Gregory Papanikos, that
concentrated on the impact of tourism attracted
by the games, he estimates that Athens cold receive
an additional 450,000 tourist annually on an average
until the year 2011. This would give a boost to
the Greek economy by 1% of GDP each year. The
total amount of tourist that will be attracted
to Greece would be approximately 6million and
would increase the GDP to 10.6 billion US$
If the games are a success there could be the
possibility that the economy of the Greeks could
slow down, especially when the government deals
with the deterioration of the budget deficit.
Greece in the year 2005 will be electing a new
president and if the current government fails
gain sufficient support the new candidate the
country will go into reelection. Such uncertainties
could prove to be very disastrous to a country
While the financial outcome from hosting the
Olympic Games can be identified reasonably clearly
after the event, the analysis in this article
shows that it is much more difficult to generalize
about the overall economic impact of the Olympic
Games. Terms of the financial impact, the contrasting
examples of Montreal, where taxpayers still meeting
the financial costs of the Games, and Los Angeles,
which ran a large financial surplus, can be quoted
here. In terms of wider economic impact, the legacy
of Barcelona and Sydney Games is generally regarded
as positive, but quantifying this effect is difficult.
Most ex-ante studies tend
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