Financial Crisis In Thailand Case Study

Financial Crisis in 1997 and Private Enterprises in Thailand

Introduction

Back in 1997, there was the financial crisis occurred in Asia. Thailand was one of the countries that also got the effect from that incident (This financial crisis was spread around Asia especially Taiwan Indonesia and Malaysia). Thai Baht was astoundingly depreciated from 25 baht per US dollar to 43-48 baht per US dollar. Depreciating of Thai currency also had impact on the external debt of Thailand. External debt of Thailand was increased from 29,300 million US dollar to 82,600 US dollar in 1996 and became 109,300 million US dollar in 1997. 22.5 percent of the External debt was from government and 77.5 percent from private sectors. After having the first development

Large number of people were unemployed because of the collapse of the firms. The business that had to deal with the import and export of goods had to shut down their business because the import and export rate were fallen. The rate of poverty in Thailand was also increased. The GDP per capita of Thailand was also decreased. Based on the information from World Integrated Solution which is one of the department under World Bank organization, GDP per capita of Thailand reduced from 2,279.74 US dollars to 2,063.76 US dollar in 1998. Then, it gradually recovered again in 1999 (World Bank, 2005). Also the rate of poverty in Thailand had also increased from 11.4 percent to 15.9 percent. (Financial crisis in Thailand 1997, 2010). We can conclude that Thailand used to have a lot of external debt that loaned from other countries, Thai government had to borrow money from IMF (with low interest and IMF also gave advices that what the government should do in order to recover the economy). The misstatement of monetary system in Chavalit Yongchaiyudh’s government was lead to the floating of Thai currency. The fixed exchange rate policy was absolutely