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The IMF Crisis in Asia Review

The IMF crisis in Asia took the world by storm. Economies of Asian countries were the ones which suffered the most from the IMF crisis. The IMF crisis triggered off in the beginning of July 1997 and impacted the Asian economies but it was not restricted to the Asian economies, the economies worldwide suffered because of the same. The crisis triggered off in Thailand, it was a result in the financial collapse of their currency Thai Baht. This paper will throw light upon how the IMF crisis had an adverse effect on the economy of Thailand and how the same gave rise to a financial crisis in the country.

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The Collapse of Thai Baht

The last three decades saw Asian economies over achieve from the perspective of Economic Growth, this was known as the “Asian Miracle”. Countries like Thailand, Malaysia, and Indonesia witnessed tremendous economic growth in the late 1980s, but all this came to an abrupt end due to the financial crisis in Asia which severely affected the Economies of these countries. Thailand saw the emergence of the crisis and the same later had an inevitable affect on the other neighboring countries too. Japan, South Korea, Thailand, Philippines were among the most severely affected countries due to the crisis.

On July 2 1997, Thai Baht the currency of Thailand was devalued and it was inevitably allowed to float, this resulted in a free fall of the currency when compared to the US dollar, Baht fell to an alarmingly high level of 15- 20 percent in comparison to the US Dollar. The free fall of Baht set the stage for the financial crisis in Asia which affected almost all the major economies in Asia. “The period following the devaluation of the Thai baht on July 2nd 1997 witnessed a sudden and unprecedented collapse in asset prices, corporate and financial fragility, and a drastic economic slowdown in East Asian markets. In just over 12 months, the region’s stock markets-once among the largest in the world-saw their market capitalization shrink by as much as 85% in US dollar terms. Similarly, East Asian currencies depreciated sharply beyond the levels needed to maintain export competitiveness, with some currencies falling by 50-80% against the US dollar by end-July 1998. East European and Latin American currencies also experienced some speculative pressure in the latter half of 1997, but generally fared much better.” (Background to the Financial and Economic turbulence of 1997-98,  2008).

The crisis in South Korea was triggered by the collapse of Thai Baht (currency of Thailand) in 1997. The currency had devalued due to stemming of reserve outflows by the central bank in order to ensure growth for money supply in the crisis period. Bank of Thailand acted as the lender of last resort, one of the important functions of a central bank, in the face of domestic banking fragilities and an immediate threat of collapse of the banking sector. The strategies adopted by the South Korean economies always left them prone to many dangers, a classic example of the same follows: The Korean First Bank got itself in a vulnerable position because of the hefty amount of loan issued to Hanbo group, with in no time the Hanbo group went bankrupt and its inability to pay the loan back to the Korean first bank resulted in the bankruptcy of Korean Bank. The loan was estimated to be roughly about $ 800 million and this example clearly draws attention towards the uncalculated risks taken by the South Korean economy which eventually led to the financial crisis in the country.


Background to the Financial and Economic turbulence of 1997-98. In The Causes of the Asian Financial and Economic Crisis. Web.

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StudyCorgi. "The IMF Crisis in Asia Review." October 21, 2021.


StudyCorgi. 2021. "The IMF Crisis in Asia Review." October 21, 2021.


StudyCorgi. (2021) 'The IMF Crisis in Asia Review'. 21 October.

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