SOUTH-EAST ASIAN CRISIS
THE ECONOMIC CRISIS IN SOUTH EAST ASIA OF 1997-99 OVERVIEW
Unfolding of the Crisis (June 1997)
? Fixed exchange rate system pegged to the USD. When the Dollar rose,
consequently the ASEAN currencies grew too, resulting in lower exports.
? Decline in Export competitiveness particularly in Electrical goods.
? The decrease in exports resulted in increased Trade and Current Account
deficit.
? The crisis first emerged in Thailand when as a crisis of loan repayment. This
led to fears of loan defaults and foreign short-term creditors withdrew funds
from Thai financial institutions.
? The withdrawal of ST credit led to pressure on forex reserves and the value of
Baht. The Bank of Thailand in its attempt to save the Baht lost all its Reserves
and had to request assistance from the IMF.
? The contagion then spread to Philippines, Malaysia and Indonesia.
ANALYSIS
Causes of the crisis in 1997
There are 2 main theses as to the causes of the crisis.
1. Weakness of Macro-Economic fundamentals
The basic weaknesses in the Macro-Economic fundamentals itself led to Low productivity and competitiveness vis-à-vis other regions of the world. Inadequate supervisio ...