The Asian Economic Crisis brought 30 years of miraculous of growth in East Asian countries to an abrupt halt. Speculated to occur, the crisis was faced without preparation and also in great anticipation. 1997 marked the year of great economic setback and caused the entire region to be crippled economically. The effects of the crisis will further be discussed below.
Among the many drastic effects that took place was the depreciation of national currencies. Countries like Malaysia, Thailand and Indonesia saw their currency dwindle into a distasteful rate against the United States. Malaysia for example, watched in horror as their currency at RM2.50/US$1 become RM5/US$1 in months. This subsequently led to the crash in stock markets in East Asia with countries like Malaysia’s Kuala Lumpur Stock Exchange Composite Index (KLSE CI) dwindle from 1200 points to 238 points in September 1997. Unemployment was at an alarming rate as visibly seen in Bangkok with 2 million workers without jobs. Dramatic changes in government also took place as one clear example was Indonesia’s Suharto’s fall in power. This was followed by a sequence of political instability that has kept the country’s economy stagnant up till now. Another effect was negative economic growth. This negative economic growth forced many companies to close down. Like Malaysia who experienced negative economic growth as much as 6% for the first time, saw the economy slow down tremendously with foreign investors pulling out from the country. The above mentioned effects can be summed up as to have plummeted the East Asian region into an economic oblivion.
As for the causes of the crisis, the three most notable ones are speculation, weak financial systems and culture. All three overlaps and it can be seen in the following. Debts were mounting in East Asian countries due to the low US interest rates. Currencies such as the Thai baht were pegged to 25B/US$1 which most debtors thought was a form of security. As the...