The alarming spread of street protests and civil unrest across the world in recent weeks looms large on the radar of global financial markets, with investors wary that the resulting pressures on stretched government budgets will be one of many consequences.
Money managers and risk analysts seeking a common thread between often unconnected sources of popular anger – from Hong Kong to Beirut and Cairo to Santiago – reckon the unrest is particularly worrying following years of modest economic growth and relatively low joblessness.
If, as many fear, the world is slipping back into its first recession in more than a decade, then the root causes of restive streets will only deepen and force embattled governments to loosen purse strings further to fund better employment, education, healthcare and other services to placate protesters.
More generous fiscal policies in a world already drowning in debt and heading into another downturn may unnerve creditors and bondholders – especially those holding government debt as an insurance against recession and a haven from volatility.
“Protests per se are unpredictable for investors by definition and fit a pattern of rising political risks that have affected market perceptions in almost all geographies,” said Standard Chartered Bank strategist Philippe Dauba-Pantanacce.
“Investors will get more nervous when they see that a country’s IMF [International Monetary Fund] package or investment promises are conditioned on fiscal consolidation and that the first austerity measures are followed by massive protests.”
More broadly, popular pushback against debt reduction and austerity raises serious questions about how mushrooming debt loads can be sustained, even after massive central bank interventions to underwrite it in recent years.
Spreading economic malaise
According to the IMF this month, a global downturn half as severe as the one spurred by the last financial crisis in 2007-2009 would result in $19 trillion of corporate debt being considered “at risk” – defined as debt from firms whose earnings would not cover the cost of their interest payments, let alone pay off the original debt.
Rising bankruptcies would, in turn, risk spurring rising job losses and yet more unrest.
Marc Ostwald, global strategist at ADM Investor Services, said he saw many of the protests as “straws that break the camel’s back” – tipping points in a broad swathe of long-standing complaints about inequality, corruption and oppression, variations on the broader themes of populism and anti-globalisation.
But Ostwald said there was a worry for financial markets that have embraced debt piles for years due to central banks printing money and buying bonds.
“At some point, the smothering impact of QE [quantitative easing] will run its course,” Ostwald said, as governments “desperately need to borrow money to prop up their economies – particularly as social unrest rises”.
Of the dozens of protest movements that have emerged in recent years, here are some of the most prominent ones:
The restive city-state has been battered by five months of often-violent protests after the Hong Kong government tried to bring in legislation that would have allowed extraditions to mainland China. The plan has been formally withdrawn, but it is unlikely to end the unrest as it meets only one of five demands pro-democracy protesters have made.
On Tuesday, authorities announced $255m in relief measures for the city’s economy – particularly in its transport, tourism and retail industries. This followed a more sizeable $2.4bn package in August to support underprivileged people and businesses.
The Hang Seng, one of Asia’s most prominent share markets, is down 12 percent since the protests started. Although it has been recovering some ground over the last two months, it has continued to lag behind other major markets.
Hundreds of thousands of people have been flooding the streets of Lebanon for nearly two weeks, furious at a political class they accuse of pushing the economy to the point of collapse.
Prime Minister Saad Hariri announced on Monday a symbolic halving of the salaries of ministers and lawmakers, as well as steps towards implementing long-delayed measures vital to fixing the finances of the heavily indebted state.
Markets are increasingly worried it will all end in default. The government’s bonds are now selling at a 40 percent discount, as credit default swaps – which investors use as insurance against those risks – have soared.
Similar factors were behind deadly civil unrest in Iraq that flared in early October. More than 100 people died in violent protests across a country where many citizens, especially young people, felt they had seen few economic benefits since fighters from the ISIL group were defeated in 2017.
The government responded with a 17-point plan to increase subsidised housing for the poor and stipends for the unemployed, as well as training programmes and small loans initiatives for unemployed youth.
Protests against President Abdel Fattah el-Sisi broke out in Cairo and other cities across Egypt in September following online calls for demonstrations against alleged government corruption, as well as recent austerity-focused measures.
Protests are rare under the former army chief, and about 3,400 people have been arrested since they began, including about 300 protesters who have since been released, according to the Egyptian Commission for Rights and Freedoms, an independent body.
The country’s main stock market dropped 10 percent over three days as the demonstrations kicked off, although it has since recovered over half of that ground.
Beginning in late 2010, anti-government protests roiled Tunisia. By early 2011, they had spread into what became known as the Arab Spring wave of protests and uprisings, which ended up toppling not only Tunisia’s leader but those of Egypt, Libya and Yemen, too. The uprising in Syria developed into a civil war that continues to be waged today.
The greater freedoms that those policies bring have unleashed long-repressed tensions between Ethiopia’s many ethnic groups, as local politicians claim more resources, power and land for their own regions. Ethiopia is due to hold elections next year.
At least 15 people have died in Chile in protests that started over a hike in public transport costs, but have grown to reflect simmering anger over intense economic inequality as well as costly health, education and pension systems seen by many as inadequate.
Chilean President Sebastian Pinera announced an ambitious raft of measures on Tuesday aimed at quelling the unrest – including a guaranteed minimum wage, a hike in the state pension offering and the stabilisation of electricity costs.
Ecuador had estimated the cuts would have freed up nearly $1.5bn per year in the government budget, helping to shrink the fiscal deficit as part of a $4.2bn IMF loan deal that Moreno had signed.
Mass protests and marches broke out in Bolivia this week after the opposition said that vote-counting in the country’s presidential election over the weekend was rigged in favour of current leader Evo Morales.
The unrest – already the biggest test of Morales’s rule since he came to power in 2006 – could spread if his declaration of outright victory is confirmed. Monitors, foreign governments and the opposition already called for a second-round vote.
The “yellow vest” movement named after the fluorescent yellow safety vests that all French motorists must carry began a year ago to oppose fuel-tax increases, but quickly morphed into a broader backlash against President Emmanuel Macron, rising economic inequality and climate change.
Macron swiftly reversed the tax hikes and announced a range of other measures worth more than 10 billion euros ($11.1bn) to boost the purchasing power of lower-income voters in France. That was followed up with another package of tax cuts in April.
This London-bred movement is pushing for political, economic and social changes to avert the worst devastation of climate change. Extinction Rebellion protesters began blockading streets and occupying prominent public spaces late last year.
Following 11 days of back-to-back protests in April, the United Kingdom government symbolically declared a “climate emergency”. The movement is developing alongside the growing #FridaysForFuture movement led by Swedish teenager Greta Thunberg and prompting schoolchildren to boycott class on Fridays.
Global warming protests have been particularly strong in Germany, where the government there recently launched a policy specifying that any spending pushing the government’s budget into deficit must be on climate-focused investments.
Incoming European Commission President Ursula von der Leyen has also introduced an ambitious European Green Deal that would include the support of 1 trillion euros ($1.11 trillion) in sustainable investments across the bloc.