what happened to Thailand

What Happened to Thailand

December 18 , 2006

The crisis that Thailand suffered in 1997 changed its economic status What once was a thriving country in the pre-crisis years became poverty stricken . Thailand is in a state of economic crisis

Thailand had a long period of booms , with high levels of demand inflation increases , unemployment decreases , and growth of national income . Thailand 's crisis was the culmination of a long period of economic boom , unprecedented in its rate and duration not only for Thailand , but for almost any country (Warr , 2000 p

The economic boom can be explained by the incoming foreign investments Starting in 1987 , foreign investments increased . From annual rates of inflow varying between 100 and 400 million USD over 15 years , the annual rate of inflow increased more than five fold , to over 2 million USD per year and remained at roughly these levels over the next eight years (Warr , 2000

The longer the boom continued , amounts of mobile funds became greater From the years before 1997 , there was a serious increase in crisis vulnerability . From 1994 onwards , the stock of short-term foreign capital exceeded the value of reserves and the discrepancy between them increased steadily . By early 1997 , the stock of short-term foreign-owned capital exceeded reserves by 80 per cent (Warr , 2000

The key to Thailand 's crisis vulnerability to a financial crisis lies in the fact that before the crisis , absolute values of reserves and the number of months of imports that were financed were increasing . The growth of volatile foreign capital exceeded the growth or reserves immensely

In the years before the crisis , the economy of Thailand became that of a bubble economy . The classic bubble economy is one which real estates prices continue to rise well beyond levels justified by the productivity of the assets , but so long as the prices continue to rise existing investors are rewarded and collateral is created for new loans to finance further investments , and so on - until the inevitable crash (Warr , 2000

In 1996 , export growth collapsed . Export growth declined from over 20 per cent per year in previous years .to around zero in 1996 (Warr 2000 ) This was not the cause of the crisis

All through the end of 1996 and into 1997 , the Bank of Thailand struggled to maintain the stability of the baht /US dollar exchange rate against the speculative attacks . Foreign exchange reserves declined from 40 billion USD in January 1997 to well under 30 billion six months later (Warr , 2000 ) In July 1997 the Bank of Thailand had announced it was going to float the currency . The exchange rate then went from 25 baht per USD to 30 . by January 1998 it was 55 , and by February 1997 it was 45

The political casualties of the crisis caused a change in the government of Thailand . This gave Thailand a political advantage in responding to the crisis . The new government did not need to defend itself against blame for the crisis itself (Warr , 2000

The...