Can the Olympic Torch reignite the French Economy
With the Paris 2024 Olympics racking in billions in viewership, it is expected to also benefit France economically. An independent study has estimated a €6.7 billion to €11.1 billion in net economic benefit. The impact is anticipated to primarily affect tourism, construction, and the organization of the Games, contributing 30%, 28%, and 42% of the net economic impact, respectively, with over €2 billion being injected into the circular flow of income by tourists in Paris.
It has been estimated that the multiplier effect will be roughly 300% of the public spending injections which provides a promising outlook for the overall economy. The Banque de France expects economic growth of 0.35% to 0.45% in the third quarter, up from 0.3% in the first half of the year. Up to 0.25% of this growth could be due to the Olympics, mainly from ticket sales and TV rights. The majority of the EUR 7 billion in private funding for the Paris 2024 Games comes from media rights, sponsorship, ticket sales, and private investments in long-term infrastructure projects. This total includes a USD 1.7 billion contribution from the International Olympic Committee in cash and services.
However, France is currently under political turmoil with Macron’s call for early election. Prior to this the budget deficit was at 5.5% of GDP and debt to GDP ratio being at 110% despite the technical peak in the business cycle. This led to Standard and Poor’s downgraded French government bonds from AA to AA- suggesting economic concern. With his election leading to no clear winner and a hung parliament, this has had negative fiscal and market consequences by derailing Macron’s expansionary policies.
Despite some economic recovery, French stock markets are struggling due to political uncertainty. The CAC 40 has fallen nearly 10% since June, with the Euro Stoxx 600 down 5%. Concerns about political changes have hit French banks hard, while luxury brands are feeling the impact of slower global growth, particularly in China. However, rising consumer spending and stronger economic growth could improve third-quarter earnings, with sectors like luxury goods and airlines possibly seeing gains from the upcoming Olympics. Examples of these include consumer stocks such as LVMH, Hermès, and Kering. Airlines like Air Liquide and Air France also carry growth potential, especially due to tourism peaks.
Overall, the Olympic Games will undoubtedly have had a positive impact on the French government compared to the counterfactual. However whether this has provided enough stimulus to propel France out of their recent stagnating situation is a question for time to tell.