What were the domestic effects of the Asian Fianncial Crisis of 1997 on the economy of...

What were the domestic effects of the Asian Fianncial Crisis of 1997 on the economy of the Thailand? What sectors were impacted and why? Own words, no copy and paste from wikipedia please!

Expert Solution

The Asian Financial crisis of 1997 was sudden. The crisis impacted adversely five Asian countries- Indonesia, South Korea, Malaysia, Phillippines and Thailand. The crisis had resulted in reversing years of social and economic development. Due to the crisis, the Thailand economy got shrunk by 10.5% which depicted decline in economic growth accompanied by increase in unemployment. These Asian countries had low or negligible unemployment rates and the economic crisis pushed up them significantly, nearly tripling in case of Thailand. Unemployment rose from 0 to 4.5%.

The crisis erupted at the time of political instability in Thailand amd impacted several sectors such as:

Banking Sector: The crisis led to currency depreciation and resulted in cracks in domestic banking sector. The reason behind these cracks was the careless approach in sanctioning loans due to which loan defaults began to rise.

Export: There was a sharp decline in Thailand's rate of export growth. Thailand's major exports of footwear, garments, sea food etc. were facing increased competition and was losing out in world's market due to high labour cost and weak currency.

Currency Exchange Market: The decrease in export growth was significant as it softened the demand of Thai currency in foreign exchange markets. Due to overvalued Thai currency, the currency speculators thinly traded in Thai currency which led to the devaluation of the currency.

Pharmaceutical Sector: As a result of currency depreciation and inflation, prices of foreign and local pharmaceuticals increased by 51% and 43%.

Health Care Sector: Due to fiscal deficits, 45% of health centres and hospitals reported that they provided sub- standard health care which resulted in an increase in unsuccessful treatment. Household expenditure on medical and institutional care fell by 36% during the crisis.

Education Sector: In educational sector, studies showed a decline of 7.2% in private schools and 1.8% in public schools in 1998 due to the reduction in public expenditure by 4% on education.

The financial crisis had an adverse impact on the overall development of the economy which triggered instability. During the crisis the social and economic conditions deteriorated rapidly, leaving behind lasting long term effects.

jeff jeffy answered 2 years ago

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