Asian Financial Crisis of 1997
The Asian Financial Crisis of 1997 was a major economic event that shook global financial markets and deeply affected several Asian economies. It began in Thailand and quickly spread to countries like Indonesia, South Korea, Malaysia, and the Philippines, exposing weaknesses in financial systems and currency policies.
The crisis started when Thailand was forced to abandon its fixed exchange rate for the Thai baht. For years, the baht had been pegged to the US dollar, but rising debt, weak banking systems, and large capital outflows made the peg impossible to maintain. When the baht collapsed, investor confidence across Asia vanished.
Currencies in the region plunged sharply, stock markets crashed, and many companies went bankrupt due to heavy foreign-currency debt. Central banks struggled to defend their currencies, while governments faced severe economic contraction. The crisis soon became global, affecting markets in Europe and the United States.
International institutions like the International Monetary Fund (IMF) stepped in with bailout packages, requiring structural reforms in exchange for financial support. While painful in the short term, these reforms helped stabilize economies and strengthen financial systems.
The Asian Financial Crisis highlighted the dangers of fixed exchange rates, excessive borrowing, and weak regulation, leaving lasting lessons for currency markets and global finance.
