The 1997 Asian Financial Crisis (AFC)

Arthur James

Haruto Noguchi

Wayne Saward

Background of the AFC

• When? 1997

• Where? Thailand, Malaysia, South Korea, Hong Kong, Indonesia

Primary Causes of AFC

• Swift Pull-out of Foreign Investments

• Underdeveloped Asian Financial Markets

Primary Consequences

• Devaluation of Asian Currencies

• Collapse of Asian Economies

Impact on Thailand

• 9% Economic Growth

• Devaluation of the Baht

• Baht Buy Back

• Fixed Floating Interest Rates

• 75% Decline in Stock Market

• Company Bankruptcies

• Unemployment

Impact on Hong Kong

• Monetary Authority’s Effort

• Overnight Rate Increase (8%23%)

• Weakened Impact of Financial Crisis

Impact on Malaysia

• Devaluation of the Ringgit

• Fixed Floating Rate System

• Economic Depression in ALL Sectors

Impact on Indonesia

• Devaluation of the Rupiah after Thailand

• IMF to the Rescue

• Severe Inflation

• Suharto Losing Power

Proposition: AFC caused by INTERNAL Factors.

• Asian Economic Growth Reliant Solely on Foreign Investments

• Weak Domestic Banking Systems

• Un-tradable Investments

• No Long Term Plan for Economic Growth

Proposition: AFC caused by INTERNATIONAL Factors

• Unreliable Risk Analysis

• IMF and World Bank – Regulation & Restrictions

Proposition: Globalization should be reduced to prevent future crisis

• Globalization is Necessary for Expansion

• International Cooperation

• IMF