SOUTH-EAST ASIAN CRISIS

PRSESENTED BY:
SURAJ KUMAR
PRATYUSH RASTOGI
PRIYANKA JAISWAL
 BUILD-UP
o “The Asian Miracle”.

o $94.1 billion dollars pumped into East Asia Between

1991 and 1997.

o Growth was fueled by export promotion, industrial

policy, lowered trade barriers, and rapid accumulation
of physical and human capital.
 Why It Happend
 Paul Krugman, an economist published an article on
“Asian Economic Miracle”, stating

• Only Result of capital investment

• No increase in Total Factor Productivity.

• Increase in TFP must for sustainable growth.

 Continued..
 Short term capital flow with motives of quick profits.

 Huge Real Estate investment based on speculation.

 Inefficient financial system

 External Debt.

 Full Capital Account Convertibility.

 Continued…….
 Exchange rate regimes

 US raising interest rates

 China’s growth as a cheap exporter

 Political instability
AFFECTED COUNTRIES
 Details

 Majority of East Asian economies engaged in capital

market liberalization
 Portfolio equity investment went down to $12.4

billion in 1996 to an outflow of $4.3billion in 1997

 Capital inflows of $73billion turned to outflows of

$30billion in 1997
 Exchange rate regime
 Pre-crisis these countries had pegged their currencies
to the US dollar.

 Depreciation of the local currencies on the foreign

exchange market means an increased external debt.

 Thailand finally floated the Baht in 1997

 Thailand

 Itall started here

 Baht was severely hit by speculation
 Government declined to devalue Bhat
 Investors fled
 Massive lay-offs
 600,000 foreign workers sent home
 Stock market dropped 75%
 Baht reached 56 units to the US dollar
 Indonesia
 Drastic devaluation of Rupiah from 2000 to 18000 for
1US$
 Sharp increase in prices led to rioting and economic

breakdown
 Governor of Bank Indonesia sacked

 President Suharto was forced to step down after 30

years in power
 Unemployment rose to 13.7million`
 South Korea
 Drastic Won devaluation from 1,000 to 1,700 for
1US$

 Major setback in the automobile industry

 National Debt to GDP ratio more than doubled

 Philippines
 Growth dropped to zero

 Peso fell from 26 /US$ to 45/US$

 President Joseph Estrada was forced to resign

Currency Exchange rate (per US$1) Change
June1997 July1998

Thai Baht 24.5 41 -40.2%

Indonesian 2380 14150 -83.2%

Rupiah

Philippine Peso 26.3 42 -37.4%

South Korean 850 1290 -34.1%

Won
 Country GNP(US$1billion) Change
June 1997 July1998

Thailand 170 102 -40%

Indonesia 205 34 -83.4%

Philippines 75 47 -37.3%

Malaysia 90 55 -38.9%

South Korea 430 283 -34.2%

 Ripples across the world

JAPAN
 40% of Japan’s exports went to this region.

 Japanese Yen fell .

 Real GDP growth rate dropped from 5% to 1.6% .

 Recession
 USA
 Markets didn’t collapse but severely hit

 NYSE briefly suspended trading

 Dow Jones Industrial Average suffered as 3rd

biggest point loss ever
 Role of IMF
 Provided huge bail out packages amounting to $95
billion
 Subject to conditions of re-organizing and

restructuring financial system

 Strong regulatory measures
 High interest rates
 Increased transparency
 At Present
 Thailand recovered and paid off its debts to IMF ahead
of schedule.

 The Baht has appreciate to 33/dollar by the end of

December 2009.

 Other economies have responded well and have left the

crisis far behind.
THANK YOU
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