It has been observed that every country that has hosted the Olympics since World War II has seen a fall in its growth rate following the event. This year, as the Olympics ended, economists were worried about a visible slowdown in the Chinese economy. Will the `Olympic curse' as the above experience has been called, fall on China as well?

The hosting of a mega event like Olympics involves a huge financial commitment. At least four Olympics host cities—Sydney, Montreal, Athens and Barcelona are still repaying the debt that had to be taken to finance the games.

What the Graph below suggests is that prior to the Olympics and during the Olympic year the Gross Domestic Product (GDP) growth is higher than average peaking at 1.5% above average GDP in the 3rd year before the Olympics. However, the Graph 1 also suggests that growth rates are lower in the years after the Olympics, than in the years prior to it.

Morgan Stanley economist Stephen Jen showed that growth and investment fell in all the host countries during the year following the games. The only exception in his study which dates back to 1956 was the US in 1996. n the beginning, the host country may experience an increase in its GDP growth rate due to high investment in infrastructure as well as increased revenues from sponsorship, ticket sales, tourism and broadcast leases. However, when the event is completed, the growth rate will slowdown.

Olympic Curse and China, Gross Domestic Product , GDP, International Olympics Committee, Purchasing Manager's Index, State Council, Financial Crisis, Economic slack, International Monetary Fund, IMF, AMP Capital Investors.