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AbstractOn July 2, 1997, Thailand devalued its currency relative to the US dollar. This
development, which followed months of speculative pressures that had
substantially depleted Thailands official foreign exchange reserves, marked the
beginning of a deep financial crisis across much of East Asia.
In subsequent months, Thailands currency, equity, and property markets
weakened further as its difficulties evolved into a twin balance-of-payments and
banking crisis. Malaysia, the Philippines, and Indonesia also allowed their
currencies to weaken substantially in the face of market pressures, with
Indonesia gradually falling into a multifaceted financial and political crisis.
IntroductionThe Asian financial crisis was a period of financial crisis that gripped much
of East Asia beginning in July 1997 and raised fears of a worldwide economic
meltdown.
Indonesia, South Korea and Thailand were the countries most affected by the
crisis. Hong Kong, Laos, Malaysia and the Philippines were also hurt by the
slump. Brunei, China, Singapore, Taiwan and Vietnam were less affected,
although all suffered from a loss of demand and confidence throughout the
region.
Response to the Questions1) Describe the economic performance of the country of your choice; say 10
years before the crisis. What were the strengths of the economy?
Response 1- From 1985 to 1996, Thailand's economy grew at an average
of over 9% per year, the highest economic growth rate of any country at
the time. Inflation was kept reasonably low within a range of 3.45.7%.
The baht was pegged at 25 to the U.S. dollar. The strengths of Thailands
economy was its massive volumes of capital inflow from aboard due to its
accommodating economic policies, goal, healthy-looking conditions, and
some other outside factors such as the stagflation of Japanese economy.
2) Towards the mid 1990s what were the main challenges that the economy
faced?
Response 2- During the mid 1990s, a large part of the capital had been put into
non-productive sectors especially real estate. Those sectors were non-productive
because they produced non-tradable goods which were sold only domestically,
resulting in less national volume of exports and thus weaken the economys
balance of trade as well as the capital account.
3) To what extent did the crisis affect the economy?
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https://en.wikipedia.org/wiki/1997_Asian_financial_crisis