The Asian Financial Crisis started in Thailand causing a financial catastrophe over a majority of Asia beginning on July 1927. The IMF crisis (which it was also referred as) caused a huge economic meltdown affecting the entire world in all social classes. It caused Asian currencies and stock markets to crash as well as putting pressure on markets outside the affected countries. The Origin of the crisis comes from weakness in their financial system and governance. Large amounts of capital were being borrowed in a short amount of time to finance poor quality investments and as the crisis grew it spread to vulnerable regions. This is one sector of how it all began.



The Asian Financial Crisis began in 1997, and was caused by a variety of different incidents. The crisis began in Thailand and it started off with the collapse of the Thai baht. The government was supporting the USD (U.S Dollar) but after extensive funding and severe financial overextension the government decided to leave the baht (Thai currency) and cut its fund to the USD. Part of the burden from this came from the real estate market. Thailand was already in foreign debt before the loss of its currency. The country was bankrupt and only sinking further in. This also spread into Southeast Asia and Japan causing their currencies to go down. All stock markets began to sink and private debt was rising. The three other main causes for this event were; Macroeconomic collapse which was from the performance of the economy and its overall income as a whole. But due to the country almost already being bankrupt the economy was already at a risk. Next was the Structural issue that rose from the deregulation of the financial sector, underdeveloped debt markets, the disclosure and corporate governance problems and distorted decisions that were made. Finally the currency market was coming to a rapid devaluation and kept decreasing because of the out-of-control expenses and low revenue.

· 1997 the baht was hitAsian_Financial_Crisis_EN.png
· Prime Minister said he would not devalue the baht, sparked the crisis and failed to defend the baht
· Layoffs in finance, real estate and construction
· 600,000 foreign workers sent back home
· Baht lost more than half its value
· Stock market dropped more than 75%
· In 1997 they were forced to float the baht and was sent a 17 billion dollar rescue package
· 2001 Thailand’s economy finally recovered
In 1997 Thailand was hit by collapse of the Baht. The prime minister of Thailand, Chavalit Yongchaiyudh, said that he would not devalue the Baht, and in turn this caused the financial crisis in Asia. Because of this there were many layoffs in finance, real estate and construction leaving many people unemployed. Also forcing 600,000 foreign workers to return home. The Thailand stock market also ending up dropping around 75%. Later on in 1997, Thailand was forced to float the Baht and was sent a 17 billion dollar rescue package. Thailand’s economy finally recovered in the year 2001.

· Didn’t think they would get hit due to a low inflation, trade surplus of 900 million and huge foreign exchange reserves
· A lot of companies were borrowing us dollars
· Over the years the rupiah strengthened, low levels of debt
· Rupiah began to drop once the baht was floated
· Rescue package of 23
· Food costs raised and riot through the country, 500 people died
· Was 2000 rupiah to one dollar, resulted in 18000 rupiah to 1 USD
The Asian crisis definitely took Indonesia by surprise. They thought that they would not be affected by the crisis due to their low inflation, a trade surplus of 900 million and huge foreign exchange reserves, however they were not aware of quite a few companies that were borrowing US dollars. They also previously had a strong economy with low levels of debt and a very strong rupiah. However once the Baht floated, the rupiah began to drop. Indonesia was sent a 23 billion dollar rescue package. Food costs were one of the many things to raise and riots began breaking out, causing 500 people to die. Before the crisis began, the rupiah was 2000 to 1 USD, and in the end change to 18000 rupiah to 1 USD.

South Korea:

· Economy was good, however they had a lot of non-performing loans
· Many companies failed to return money
· KIA needed emergency loans
· Car company ended up having to be sold to GM
· Tripled its per capita GDP and gone back to normal
South Korea’s economy seemed to be doing alright however the banking section was having problems with all the non-performing loans they had out. Many companies had been taking money from the bank. Companies began needing emergency loans and help, for example the car company KIA. A Korean car company was so in debt, that General Motors in the US had to buy it. However since then South Korea has tripled in per capita and gone back to normal.


· Fell into a short recession
· 20% depreciation of their dollar
· Recovered in less than a year
During the financial crisis across Asia, Singapore was one of many countries affected by it. They dropped into a short recession that led to a 20% depreciation of their dollar. After a few cuts to lower labor costs, Singapore’s economy recovered in less than a year.

Other countries who were affected by the Asian crisis include;

· China
· Malaysia
· Japan


The crisis had big macro-level effects, including decreasing the values of currencies,
stock markets, and other asset prices of several Asian countries. Thailand, Indonesia and South Korea were the countries most affected by the crisis. The Crisis also desupted politics in these coutries.
Finacial Facts:
Nominal US dollar GDP per capital fell in 2007:
· 42.3% in Indonesia,
· 21.2% in Thailand,
· 19% in Malaysia,
· 18.5% in Korea
· 12.5% in the Philippines.

The CIA World Factbook reported that the per capita income in Thailand declined from $8,800 to $8,300 between 1997 and 2005; in Indonesia it declined from $4,600 to $3,700; in Malaysia it declined from $11,100 to $10,400. Over the same period, world per capita income rose from $6,500 to $9,300.

"1997 Asian Financial Crisis." 1997 Asian Financial Crisis. 14 Nov. 2008

The Asian Financial Crisis: Causes and Lessons."
The Asian Financial Crisis: Causes and Lessons. 14 Nov. 2008 http://

Causes of Crisis."
The Crisis. 14 Nov. 2008 <http://>.

"The IMF's Response to the Asian Crisis."
International Monetary Fund. Jan. 1999. 14 Nov. 2008 <>.

Morgan, J. P. "Asian Financial Crisis."
UCLA Center East Asian Studies__. 1998. 14 Nov. 2008 <>.