Financial Crises In Thailand. Presented by: Paramazyan , Savak Miu , Paul. Outline. Introduction Overview Causes of Thai Financial Crises Impacts of the Crises Recovery Strategies Present Situation Conclusion. Introduction. Introduction Kingdom of Thailand .
Causes of Thai Financial Crises
Impacts of the Crises
A unified Thai kingdom was established in the mid-14th century. Known as Siam until 1939,
Thailand is the only Southeast Asian country never to have been taken over by a European power.
five horizontal bands of red, white, blue, white, and red
Since early 1990s, Thai economy had attracted massive volumes of capital inflow from aboard due to:
Its accommodating economic policies
The recession of European Economy
The stagflation of Japanese economy
The obvious causes that are broadly discussed
Weaknesses in domestic macro-economic fundamentals
Weakness in the Financial System
Financial liberalization and the volatile international capital flows
Speculative Attacks and the Floatation of Baht
Unstable political and social institutions
Highly depreciated baht because the lack of confidence in Thai economy
Massive increase in external debt burden due to high dependency on foreign capital and deeply depreciated baht.
• Stock Market crisis
Portfolio investment drawn out, stock market crash
• Economic recessions
“The Asian Crisis”
Depreciation of exchange rates
Financial institution crises
Stock markets collapses
International investors’ lack of confidence as they think that similar problems (chronic current account deficit and weak financial system) will also occur in other countries such as Malaysia, Indonesia, Philippines and South Korea.
For other countries with better financial structure such as Japan, Hong Kong and Singapore, they suffer because of contagious effects.
IMF Assistance to Thailand During the Crises
IMF support = USD 4 Billion
Bilateral and Multilateral Support
= USD 13.2 Billion
Total = USD 17.2 Billion
This aimed to
Stop further capital outflows as well as regain the market confidence during the shock
turn around the foreign reserve position
Financial Sector Restructuring
This policy aimed to strengthen the banking system by closing possible loopholes on facilitating new credits by hurting as least people as possible
The rapid spread of the Asian crisis and chronic recession bringing a larger than expected depreciation of the Baht, a sharp economic downturn and adverse regional economic developments—warranted revisions to the Thai program. The revisions were undertaken through a series of program reviews conducted in close consultation with the Thai authorities.
In July 2003, Thailand repaid its final US$1.51bn batch of outstanding debts from US$17.2bn IMF bailout package. The repayment came two years ahead of schedule.
Real GDP growth reached a strong 6.7% in 2003, leaded by domestic consumption and export.
Expansionary economic policy, coupled with the expected upturn in the global economy, are expected to drive growth higher in 2004 to an average of 7.7%.
The economy is slowed down to a still respectable 4.9% in 2005, owing to some upward movement in interest rates and rising concern about the government’s off-budge liabilities.
Household consumption is currently at an all-time high as a results of high levels of consumer confidence.
Investment growth is recovering, primarily in the form of property development.
Export growth will rise, but import growth is expected to grow at a faster pace.
With a well-developed infrastructure, a free-enterprise economy, generally pro-investment policies, and strong export industries, Thailand enjoyed solid growth from 2000 to 2008 - averaging more than 4% per year - as it recovered from the Asian financial crisis of 1997-98. Thai exports - mostly machinery and electronic components, agricultural commodities, and jewelry - continue to drive the economy, accounting for as much as three-quarters of GDP. The global financial crisis of 2008-09 severely cut Thailand's exports, with most sectors experiencing double-digit drops. In 2009, the economy contracted about 2.8%. The Thai government is focusing on financing domestic infrastructure projects and stimulus programs to revive the economy, as external trade is still recovering and persistent internal political tension and investment disputes threaten to damage the investment climate