Front Page







World News in Audio

On Air


Talking Point


Low Graphics


Site Map

Wednesday, January 14, 1998 Published at 18:23 GMT

Special Report

Boom to Bust: Asia's economic crisis

Asian economic crisis

It has been a traumatic time recently in the Asian financial markets. For decades the so-called Asian Tigers were seen by many as a model of economic development. Thailand, Malaysia, Korea and Indonesia enjoyed a boom which lifted millions out of the slums and shanties. But now the bubble has burst and the effects are being felt right across the region.

Click on our interactive map to reveal details of how the countries in the region have been affected.
Ed Buscall examines the background to the recent events (Dur: 13'42")
Click here to listen to a special edition of the World Today from the BBC World Service, on the background to the crisis.

How did it start?

The devaluation of the Thai baht in July started a chain of devaluations across South East Asia. What was first seen as a regional crisis became a global problem in October 1997 when currency speculators moved against Hong Kong's long standing link with the US dollar.

The baht was devalued after being attacked by speculators, who believed it was overvalued and vulnerable due to Thailand's poor economic fundamentals. The economy had seen massive overspending in previous years with levels of debt skyrocketing.

Another problem was the growth of the Chinese economy, which increasingly took over export markets that had been dominated by the Asian tigers, leaving them with no option but to devalue to remain competitive. This was particularly a problem as Thais could no longer count on foreigners to finance the growing current account deficits due to lack of confidence.

The lack of competitiveness with China was also increased by the rise of the dollar, which the Asian currencies were tied to.

The knock-on effect

In October, Hong Kong shares lost nearly half their value and there were huge stock market falls elsewhere.

Later that month, the crisis spread to South Korea and the world's 11th largest economy had to go cap in hand to the International Monetary Fund for a massive $57bn loan.

In November, the economic weaknesses of the Japanese economy were exposed by the collapse of Yamaichi, one of Japan's largest and most prestigious financial houses.

When trading began in the new year, the south-east Asian currencies began another slide. This was in part prompted by Indonesia's austerity budget, which drew criticism for not going far enough in implementing economic reforms.

This led to a loss of confidence in the Indonesian rupiah, which has pushed the country into its worst economic crisis in 30 years. The rupiah is at an all time low of less than 30% of its value six months ago.

Many of the other currencies of the region have been devalued by between 30% and 50% since July 1997.

A helping hand

South Korea, Indonesia, Thailand and the Phillipines have all sought loans from the IMF to bail out their economies. But the IMF has insisted that the governments involved implement strict economic reforms as a condition of each loan.

This tough medicine has involved painful economic decisions resulting in the closure of companies and banks and increased unemployment.

Many analysts have said that what is required in the ailing Tigers economies is a complete change of mindset from that which prevailed during the boom years - a recognition that never again can such dizzy rates of growth be sustained through uncontrolled borrowing.

Back to top | BBC News Home | BBC Homepage

Link to BBC Homepage

Internet Links

Hong Kong Stock Exchange

International Monetary Fund

Korean Stock Exchange

India Stock Exchange

Thailand Stock Exchange

Indonesia Online: Stock Market

Tokyo Stock Exchange

The BBC is not responsible for the content of external internet sites.
In this section

The downward spiral of the Asian tigers

Thailand: origin of the crisis

South Korea: economic reforms run into difficulty

Underlying economic weaknesses exposed

Malaysia: attacks speculators

Special Report Contents
- Louise Woodward case
- El Nino
- Space
- Unabomber
- Mars Surveyor probe
- Education League Tables
- Whitbread yacht race
- Single currency
- House of Lords
- Sport

1998 Contents


Balloon race


Sri Lanka


Drugs in sport


Millennium Dome


WEF Davos








Karla Faye Tucker


EU Enlargement


Five Nations


Asian economic crises


London Referendum


Clinton Scandal


Water Week




Pope in Cuba


South Korea


Chinese New Year


Harley Davidson




Car Crash


Northern Ireland




Super Bowl XXXII




Gulf War Syndrome




Bloody Sunday


Food Agency


Bon Appetit


Eurasia 98


US abortion rights


liberal democrats




Welfare Reform


Australian Republic






India Elections