The economy of Thailand was subject to currency as well as financial crisis during the middle half of 1997. Compound growth rate during the period 1986 to 1996 was recorded as 9%. Real gross domestic product dropped in the year 1997 by 1.3%. In the year 1998, the decline was of 9.4%.
The Thai government had reciprocated to the situation promptly thereby reversing the backslide in the macroeconomic set up. After embracing economic reform in Thailand, real gross domestic product increased by 0.8% in the first three months of 1999 and by 3.5% during the next three months of the year 1999.
Since the crisis faced by the country was pertaining to currency as well as financial sector, the government in Thailand addressed both the aspects of the crisis.
The government attempted to reconstruct foreign reserves so that confidence is regained in the currency. These attempts comprised fiscal policies as well as monetary policies. As a result of the economic reform in Thailand, foreign reserves escalated to USD$29 billion in 1999 August from USD$0.8 billion in 1997 August.
The economic reform in Thailand that hinted at the financial sector included handling non performing loans, working up on guidelines and supervision of the various financial organizations, assisting in the revival of the sick financial institutions.
Owing to the economic reform in Thailand, the Thai government escalated the public deficit to 3% of the gross domestic product whereas the target was actually 1% of the GDP. This was the scenario for the financial year 1998.
As a result of decreasing rate of inflation, the Thai government was in a position to lower the interest rates too. Short-term interest rates nosedived to 2% in the year 1999 from 23% in 1997 September. The rates for lending had also dropped to 9.75% from 14.25%.
Exchange rate policies:
The government in Thailand had opted for economic reform in Thailand to exercise control over the various spheres of the fiscal as well as the financial sector.
The Thai government focused on all the sectors of the economy in an optimum manner and this led to the sound growth in the economy of the country.
Last Updated on : 26th June 2013