A Case On South East Asian Economic Crisis of 1997: Vaishali Rihen Batra (B. A. (H) Economics)
A Case On South East Asian Economic Crisis of 1997: Vaishali Rihen Batra (B. A. (H) Economics)
A Case On South East Asian Economic Crisis of 1997: Vaishali Rihen Batra (B. A. (H) Economics)
INTRODUCTION
Started in Thailand
PHASES
Initiated by two rounds of currency depreciation in 1997
1.
2.
3.
4.
.
1.
2.
3.
4.
5.
Pegged Currencies
Encouraged external borrowing
THE BUBBLE
Government action:
Raised interest rates tremendously to prevent capital flight
Buying up excess domestic currency at fixed rate to maintain the peg
Not sustainable in the long run (due to limited supply of forex reserves)
Over $100billion was pulled out of the region in 199798 which was 5 percent of the GDP
THAILAND
INDONESIA
Excessive inflation
Riots
SOUTH KOREA
PHILIPPINES
MALAYSIA
Attacked by Speculators
IMF INTERVENTION
IMPACT OF IMF
INTERVENTION
In Indonesia, the worst hit country, poverty rates rose from an official
level of 11 percent before the crisis to 40 to 60 percent in varying
estimates. GDP declined by 15 percent in one year.
In September 1998, UNICEF reported that more than half the children
under two years old in Java, Indonesia's most populous island, were
suffering from malnutrition.
LEARNINGS
PRESENT SCENARIO
As was the case in 1997/98, markets are in a
certain state of disarray. Today we have
concerns over the extent of the Chinese
slowdown, the reversion in the Euro area
towards stagnation along with rising
deflationary risks, and the drive (aided and
abetted by the Organization of the Petroleum
Exporting Countries) for substantially lower
petrol prices.