Protests persist, but fallout will vary

Ongoing protests in Chile, Hong Kong and Lebanon will weigh on their economies and financial markets, but to different degrees. While the tightening of financial conditions and strikes in Chile will hit activity in Q4, the strength of the government’s balance sheet and institutions suggest that more prolonged fallout may be avoided. Meanwhile, Hong Kong’s economy is in a deep recession but, for now, tight lending standards means that its banks should weather the storm. A key risk in the medium term is the erosion of the city’s status as an international business centre. Finally, protests in Lebanon will probably trigger the most severe near-term fallout. The dire fiscal position (see Chart 1), weak banking sector and overvalued currency are a recipe for a messy crisis. The protests could be the straw that breaks the camel’s back.