International Financial Crisis: Asia 1997-1998

Effects of the Asian Financial Crisis
The countries that were most severely affected by the Asian Financial Crisis included Indonesia, Thailand, Malaysia, South Korea, and the Philippines. They saw their currency exchange rates, stock markets, and prices of other assets all plunge. The GDPs of the affected countries even fell by double digits.
From 1996 to 1997, the nominal GDP per capita dropped by 43.2% in Indonesia, 21.2% in Thailand, 19% in Malaysia, 18.5% in South Korea, and 12.5% in the Philippines. Hong Kong, Mainland China, Singapore, and Japan were also affected, but less significantly.
Besides its economic impact, the Asian Financial Crisis also resulted in political repercussions. The Prime Minister General of Thailand, Yongchaiyudh, and the President of Indonesia, Suharto, resigned. An anti-Western sentiment was triggered, especially against George Soros, who was blamed for triggering the crisis with large amounts of currency speculation by some individuals.
The impact of the Asian Financial Crisis was not limited to Asia. International investors became less willing to invest in and lend to developing countries, not only in Asia but in other areas of the world. Oil prices also fell due to the crisis. As a result, some major mergers and acquisitions in the oil industry took place to achieve economies of scale.³
IMF’s Role in the Asian Financial Crisis
The International Monetary Fund (IMF) is an international organization that promotes global monetary cooperation and international trades, reduces poverty, and supports financial stability. The IMF generated several bailout packages for the most affected countries during the financial crisis. It provided packages of around $20 billion to Thailand, $40 billion to Indonesia, and $59 billion to South Korea to support them, so they did not default.
The bailout packages are structural-adjustment packages. The countries that received the packages were asked to reduce their government spending, allow insolvent financial institutions to fail, and raise interest rates aggressively. The purpose of the adjustments was to support the currency values and confidence over the countries’ solvency.