Recent from talks
1997 Asian financial crisis
Knowledge base stats:
Talk channels stats:
Members stats:
1997 Asian financial crisis
The 1997 Asian financial crisis gripped much of East and Southeast Asia during the late 1990s. The crisis began in Thailand in July 1997 before spreading to several other countries with a ripple effect, raising fears of a worldwide economic meltdown due to financial contagion. However, the recovery in 1998–1999 was rapid, and worries of a meltdown quickly subsided.
Originating in Thailand, where it was known as the Tom Yum Kung crisis (Thai: วิกฤตต้มยำกุ้ง) on 2 July, it followed the financial collapse of the Thai baht after the Thai government was forced to float the baht due to lack of foreign currency to support its currency peg to the U.S. dollar. Capital flight ensued almost immediately, beginning an international chain reaction. At the time, Thailand had acquired a burden of foreign debt. As the crisis spread, other Southeast Asian countries and later Japan and South Korea saw slumping currencies, devalued stock markets and other asset prices, and a precipitous rise in private debt. Foreign debt-to-GDP ratios rose from 100% to 167% in the four large Association of Southeast Asian Nations (ASEAN) economies in 1993–1996, then shot up beyond 180% during the worst of the crisis. In South Korea, the ratios rose from 13% to 21% and then as high as 40%, while the other northern newly industrialized countries fared much better. Only in Thailand and South Korea did debt service-to-exports ratios rise.
South Korea, Indonesia and Thailand were the countries most affected by the crisis. Hong Kong, Laos, Malaysia and the Philippines were also hurt by the slump. Brunei, mainland China, Japan, Singapore, Taiwan, and Vietnam were less affected, although all suffered from a general loss of demand and confidence throughout the region. Although most of the governments of Asia had seemingly sound fiscal policies, the International Monetary Fund (IMF) stepped in to initiate a $40 billion program to stabilize the currencies of South Korea, Thailand, and Indonesia, economies particularly hard hit by the crisis.
However, the efforts to stem a global economic crisis did little to stabilize the domestic situation in Indonesia. After 30 years in power, Indonesian dictator Suharto was forced to step down on 21 May 1998 in the wake of widespread rioting that followed sharp price increases caused by a drastic devaluation of the rupiah. The effects of the crisis lingered through 1998, where many important stocks fell in Wall Street as a result of a dip in the values of the currencies of Russia and Latin American countries that weakened those countries' demand for U.S. exports. In 1998, growth in the Philippines dropped to virtually zero. Only Singapore proved relatively insulated from the shock, but nevertheless suffered serious hits in passing, mainly due to its status as a major financial hub and its geographical proximity to Malaysia and Indonesia. By 1999, however, analysts saw signs that the economies of Asia were beginning to recover. After the crisis, economies in East and Southeast Asia worked together toward financial stability and better financial supervision.
The causes of the debacle are many and disputed. Thailand's economy developed into an economic bubble fueled by hot money. More and more was required as the size of the bubble grew. The same type of situation happened in Malaysia and Indonesia, which had the added complication of what was called "crony capitalism". The short-term capital flow was expensive and often highly conditioned for quick profit. Development money went in a largely uncontrolled manner to certain people only – not necessarily the best suited or most efficient, but those closest to the centers of power. Weak corporate governance also led to inefficient investment and declining profitability.
Until 1999, Asia attracted almost half of the total capital inflow into developing countries. The economies of Southeast Asia in particular maintained high interest rates attractive to foreign investors looking for a high rate of return. As a result, the region's economies received a large inflow of money and experienced a dramatic run-up in asset prices. At the same time, the regional economies of Thailand, Malaysia, Indonesia, Singapore and South Korea experienced high growth rates, of 8–12% GDP, in the late 1980s and early 1990s. This achievement was widely acclaimed by financial institutions including the IMF and World Bank, and was known as part of the "Asian economic miracle".
In the mid-1990s, Thailand, Indonesia and South Korea had large private current account deficits, and the maintenance of fixed exchange rates encouraged external borrowing and led to excessive exposure to foreign exchange risk in both the financial and corporate sectors.
In the mid-1990s, a series of external shocks began to change the economic environment. The devaluation of the Chinese renminbi and the Japanese yen, subsequent to the latter's strengthening due to the Plaza Accord of 1985, the raising of U.S. interest rates which led to a strong U.S. dollar, and the sharp decline in semiconductor prices, all adversely affected their growth. As the U.S. economy recovered from a recession in the early 1990s, the U.S. Federal Reserve Bank under Alan Greenspan began to raise U.S. interest rates to head off inflation.
Hub AI
1997 Asian financial crisis AI simulator
(@1997 Asian financial crisis_simulator)
1997 Asian financial crisis
The 1997 Asian financial crisis gripped much of East and Southeast Asia during the late 1990s. The crisis began in Thailand in July 1997 before spreading to several other countries with a ripple effect, raising fears of a worldwide economic meltdown due to financial contagion. However, the recovery in 1998–1999 was rapid, and worries of a meltdown quickly subsided.
Originating in Thailand, where it was known as the Tom Yum Kung crisis (Thai: วิกฤตต้มยำกุ้ง) on 2 July, it followed the financial collapse of the Thai baht after the Thai government was forced to float the baht due to lack of foreign currency to support its currency peg to the U.S. dollar. Capital flight ensued almost immediately, beginning an international chain reaction. At the time, Thailand had acquired a burden of foreign debt. As the crisis spread, other Southeast Asian countries and later Japan and South Korea saw slumping currencies, devalued stock markets and other asset prices, and a precipitous rise in private debt. Foreign debt-to-GDP ratios rose from 100% to 167% in the four large Association of Southeast Asian Nations (ASEAN) economies in 1993–1996, then shot up beyond 180% during the worst of the crisis. In South Korea, the ratios rose from 13% to 21% and then as high as 40%, while the other northern newly industrialized countries fared much better. Only in Thailand and South Korea did debt service-to-exports ratios rise.
South Korea, Indonesia and Thailand were the countries most affected by the crisis. Hong Kong, Laos, Malaysia and the Philippines were also hurt by the slump. Brunei, mainland China, Japan, Singapore, Taiwan, and Vietnam were less affected, although all suffered from a general loss of demand and confidence throughout the region. Although most of the governments of Asia had seemingly sound fiscal policies, the International Monetary Fund (IMF) stepped in to initiate a $40 billion program to stabilize the currencies of South Korea, Thailand, and Indonesia, economies particularly hard hit by the crisis.
However, the efforts to stem a global economic crisis did little to stabilize the domestic situation in Indonesia. After 30 years in power, Indonesian dictator Suharto was forced to step down on 21 May 1998 in the wake of widespread rioting that followed sharp price increases caused by a drastic devaluation of the rupiah. The effects of the crisis lingered through 1998, where many important stocks fell in Wall Street as a result of a dip in the values of the currencies of Russia and Latin American countries that weakened those countries' demand for U.S. exports. In 1998, growth in the Philippines dropped to virtually zero. Only Singapore proved relatively insulated from the shock, but nevertheless suffered serious hits in passing, mainly due to its status as a major financial hub and its geographical proximity to Malaysia and Indonesia. By 1999, however, analysts saw signs that the economies of Asia were beginning to recover. After the crisis, economies in East and Southeast Asia worked together toward financial stability and better financial supervision.
The causes of the debacle are many and disputed. Thailand's economy developed into an economic bubble fueled by hot money. More and more was required as the size of the bubble grew. The same type of situation happened in Malaysia and Indonesia, which had the added complication of what was called "crony capitalism". The short-term capital flow was expensive and often highly conditioned for quick profit. Development money went in a largely uncontrolled manner to certain people only – not necessarily the best suited or most efficient, but those closest to the centers of power. Weak corporate governance also led to inefficient investment and declining profitability.
Until 1999, Asia attracted almost half of the total capital inflow into developing countries. The economies of Southeast Asia in particular maintained high interest rates attractive to foreign investors looking for a high rate of return. As a result, the region's economies received a large inflow of money and experienced a dramatic run-up in asset prices. At the same time, the regional economies of Thailand, Malaysia, Indonesia, Singapore and South Korea experienced high growth rates, of 8–12% GDP, in the late 1980s and early 1990s. This achievement was widely acclaimed by financial institutions including the IMF and World Bank, and was known as part of the "Asian economic miracle".
In the mid-1990s, Thailand, Indonesia and South Korea had large private current account deficits, and the maintenance of fixed exchange rates encouraged external borrowing and led to excessive exposure to foreign exchange risk in both the financial and corporate sectors.
In the mid-1990s, a series of external shocks began to change the economic environment. The devaluation of the Chinese renminbi and the Japanese yen, subsequent to the latter's strengthening due to the Plaza Accord of 1985, the raising of U.S. interest rates which led to a strong U.S. dollar, and the sharp decline in semiconductor prices, all adversely affected their growth. As the U.S. economy recovered from a recession in the early 1990s, the U.S. Federal Reserve Bank under Alan Greenspan began to raise U.S. interest rates to head off inflation.
Recent media