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Asian Financial Crisis erupts Jul 1997

The Asian financial crisis, which erupted in July 1997, caused a number of Asian countries to experience a sharp decline in the values of their currencies, stock markets and other asset prices.[1] The crisis threatened these countries' financial systems and disrupted their real economies, triggering large contractions in credit and economic activity that resulted in adverse social consequences, coupled with financial and political upheavels.[2]

The crisis began in Thailand as a result of intense speculation that the baht was over-valued.[3] In a bid to devalue the baht, the Thai government floated the currency on 2 July 1997, which immediately fell in value by 15 percent.[4] The contagion soon spread rapidly to other Asian countries, which were vulnerable to an erosion of competitiveness after the devaluation of the baht.[5] The countries most affected by the crisis were Indonesia, South Korea, Malaysia, Thailand and the Philippines.[6]

By October that year, the Thai baht, Indonesian rupiah, Malaysian ringgit and Philippine peso had weakened sharply against the US dollar.[7] Indonesia's rupiah crisis first began in July but intensified in November when the rupiah fell by more than 30 percent in value against the US dollar. The decline of the rupiah coupled with steep price hikes for food staples led to riots throughout the country.[8] Also in November, the South Korean won fell to a new record low against the US dollar, which was caused by corporate failures and bad banking loans. The composite stock index plunged to its lowest level in more than 10 years, amid fears that South Korea could become “the next Thailand”.[9] In September 1998, Malaysia pegged its currency to the US dollar as part of capital controls to shield its economy from the crisis.[10]

Despite distress in the region, Singapore weathered the effects of the financial crisis better than its neighbours. Although the stock and property markets took a beating, the economy performed well under the circumstances.[11] Nonetheless, the increase in Singapore's GDP growth for 1998 was 1.5 percent, a slide from an 8 percent rise the year before.[12] The economy rebounded in 1999 with a 5.4 percent growth in GDP.[13]

1. Pempel, T.J. (1999). Introduction. In T. J. Pempel (Ed.), Politics of the Asian Economic Crisis (p. 1). Ithaca & London: Cornell University Press. Call No.: RSING 332.095 PO; Baht crisis puts pressure on South-east Asian central banks. (1997, July 7). The Straits Times, p. 35. Retrieved from NewspaperSG.
2. Pempel, 1999, pp. 1–2; Knowles, J. C., Pernia, E. M., & Racelis, M. (1999, November). Economic Staff Paper Number 60: Social consequences of the financial crisis in Asia. Retrieved September 12, 2013, from Asian Development Bank website: http://www.adb.org/sites/default/files/pub/1999/ESP060.pdf
3. Tang. E. (1997, July 3). Floating baht seen as devaluation. The Straits Times, p. 1; Noble, G. W., & Ravenhill, J. (2000). Causes and Consequences of the Asian Financial Crisis. In G. W. Noble & J. Ravenhill, The Asian financial crisis and the architecture of global finance (p. 2). Cambridge: Cambridge University Press. Call no.: RBUS 332.095 ASI; Tang, E. (1997, July 4). Thumbs up. The Straits Times, p. 52 Retrieved from NewspaperSG.
4. The Straits Times, 3 July 1997, p. 1; Baht’s 15% drop is too much, says Thai central bank. (1997, July 15). The Straits Times, p. 46; Retrieved from NewspaperSG; Ngiam, K. J. (2000, March). Coping with the Asian financial crisis: The Singapore experience (p. 8).  Visiting Researchers Series No. 8 (2000). Singapore: Institute of Southeast Asian Studies. Retrieved September 12, 2013, from: http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan033317.pdf; Haggard, S. (2000). The political economy of the Asian financial crisis (p. 3). Washington: Institute for International Economics. Call no.: RBUS 332.095 HAG.
5. Haggard, 2000, pp. 3–4.
6. Cloud over capital flows. (1998, February 4). The Business Times, p. 10. Retrieved from NewspaperSG.
7. Only four international currencies have escaped rout for now. (1997, October 26). The Straits Times, p. 40. Retrieved from NewspaperSG.
8. Indonesia widens rupiah trading band. (1997, July 12). The Straits Times, p. 70; Sebastian, L. C. (1997, November 7). Will Jakarta bite the bullet to solve its economic woes? The Straits Times, p. 53; Rupiah falls raise debt payments. (1997, November 19). The Straits Times, p. 59; Jakarta govt system ‘makes crisis worse’. (1998, April 29). The Straits Times, p. 19; Retrieved from NewspaperSG.
9. South Korea in a pickle. (1997, November 11). The Business Times, p. 12; South Korea needs more than $32b. (1997, November 26). The Straits Times, p. 62. Retrieved from NewspaperSG.
10. Ringgit pegged at 3.8 to greenback. (1998, September 3). The Straits Times, p. 52. Retrieved from NewspaperSG.
11. Ngiam, 2000, pp. 1, 6; Fernandez, W. (1999, May 20). Recession over but it’s not time to rejoice. The Straits Times, p. 1. Retrieved from NewspaperSG.
12. $466.3m deficit, (1999, February 27). The Straits Times, p. 9. Retrieved from NewspaperSG.
13. Ngiam, 2000, p. 19; Economy to grow by 7.6%.(2000, February 26). The Straits Times, p. 7. Retrieved from NewspaperSG.


The information in this article is valid as at 2013 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the topic.

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