The Economy of Thailand

840 WordsJul 10, 20184 Pages
Crisis outbreak The fixed exchange rate has given a fake sentiment of security in the southeastern Asian countries, (Thailand, South Korea, and Indonesia) this system has encouraged these countries to conclude a huge debt denominated by the U.S. Dollar, in additional to this the exports of these countries were weak in the mid-seventies because of , the high value of the U.S. Dollar against the Japanese yen, on the other hand China devalued its currency in 1994, the huge inward capital flows and the weakness of the exports had reflected on the widening of the deficits in current accounts as well as a significant portion of the inflows were in the form of a short-term loans, which leads these countries to an external distress. As a result…show more content…
On 30th of June for the same year, the Thai Prime Minister Chavalit Yongchaiyudh said that he would not devalue the baht. This was the main reason that ignited the Asian financial crisis as the Thai government failed to defend its currency, which was pegged to the basket of currencies in which the U.S. dollar was the main component, against international speculators. The booming in the Thai’s economy came to discontinue in the middle of a massive layoffs in finance, real estate, and construction that resulted in an enormous numbers of workers returning to their villages in the countryside and 600,000 foreign workers being sent back to their home countries. The baht devalued quickly and lost more than half of its value, it reached to its lowest point of 56 units to the US dollar in January 1998, furthermore, the stock market has plunged 75%. Without the foreign reserves to support the Thai Baht peg, the government was finally forced to float of the Baht, on the 2ed of July 1997, they allow the value of the Baht to be set by the currency market. Whereas, on 11th of August of the same year, the IMF unveiled a rescue package for Thailand with more than $17 billion, subjected to circumstances such as passing laws relating to bankruptcy. Furthermore, reorganizing and reforming procedures and setting up a strong framework for the banks and other financial institutions. The IMF approved another bailout package of $3.9 billion. In
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