Chapter 10: The causes of the 1997 Asian crisis and its impacts on the ASEAN economies
10. The causes of the 1997 Asian crisis and its impacts on the ASEAN economies The recent crisis that swept across the ASEAN region in 1997 and 1998 has not only thrown into doubt the future economic prosperity of the ASEAN countries, but has also raised intriguing questions about the right approach to economic development and the future of ASEAN economic cooperation. The crisis has had devastating economic, social and political consequences for the ASEAN countries, particularly in the hardest-hit economies of Thailand, Indonesia and Malaysia. This chapter will re-examine the origin and causes of the recent Asian crisis, evaluate the impacts it has had on their economies, the economic policies adopted and the impact of the crisis on their extra-ASEAN trade relations. 10.1 GENESIS AND CAUSES OF THE 1997 ASIAN CRISIS No one had anticipated that the ASEAN economies would experience a severe economic crisis, as the region had generally been performing remarkably well for the past decades. Prior to the crisis, countries such as Thailand and Malaysia had large current account deficits, but not at alarming levels. No ASEAN country had persistent and unmanageable fiscal deficits and foreign debts, nor had experienced excessive monetary expansion. But the economic crisis, which started as a currency crisis and then as a financial crisis, did occur. Much has been written and said about the causes of the crisis, and they all have agreed that a number of factors were responsible for it. These factors could be classified as financial, political and...
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