The Asian Financial Crisis’ 25th Anniversary
The Asian financial crisis, which started in February 1998 and impacted nations including Thailand, Indonesia, and their neighbors, is commemorated this month on its 25th anniversary. These nations fell into despair as international leaders struggled to stop the crisis from spreading, which caused a major downturn in their economy.
The Baht’s Resilience
The stock market in Thailand fell by more than 60%, and the value of the baht relative to the dollar dropped by more than half as a result of the country’s roughly 20% economic downturn. The baht has shown to be exceptionally durable despite the uncertainties, keeping its value versus the dollar better than any other developing world currency and only being exceeded by the Swiss Franc in the developed world.
The baht trades at 33 to the dollar, not much lower than 26 before the crisis, but the Indonesian rupiah is presently trading about 15,500 to the dollar, down from 2,400 before the crisis. Despite this, Thailand continues to be a popular travel destination with prices for excellent dining in Phuket starting at $30 and 5-star hotel rooms around $200 per night.
Gains from Economic Orthodoxy
Thailand’s government adopted a fiscally cautious stance following the crisis, which led to a government deficit that averages 1% of GDP—less than half the norm for rising nations. The central bank has likewise exercised caution, maintaining relatively high interest rates and the third-lowest money supply growth among major emerging countries at 7% per year.
Thailand is one of the few rising nations to attain such stability, with inflation averaging slightly over 2%, the same as the US. While tourism has more than quadrupled as a proportion of GDP to 12%, the manufacturing sector, which accounts for a quarter of the country’s GDP, has continued to develop and draw significant international investment.
overcoming obstacles
Thailand has established financial stability and seen its per capita income more than quadruple to over $8,000 despite political turbulence, including four new constitutions in the previous 25 years. Its industrial sector has progressed from producing automobiles to producing parts for electric vehicles, and it still draws international investment. The Thai baht has become the most resilient currency in the world and a case study in the advantages of economic conservatism after overcoming difficulties that the Swiss franc never encountered.