The 1997-98 Asian Financial Crisis was one of the most devastating economic events in modern Asian history.
Timeline
- July 1997: Thailand abandons THB peg to USD → baht collapses 50%
- Aug-Oct 1997: Crisis spreads to Malaysia, Indonesia, Philippines, South Korea
- Late 1997: IMF bailouts for Thailand ($17B), Indonesia ($43B), South Korea ($57B)
- 1998: Worst year — Indonesian rupiah lost 80% of value, KOSPI fell 70%
- 1999: Recovery begins
Market Impact
| Market | Peak-to-Trough Decline |
| Thailand | -75% |
| Indonesia | -80% |
| South Korea | -70% |
| Hong Kong | -60% |
| Malaysia | -75% |
Lessons Learned
After the crisis, Asian countries:
- Built massive foreign exchange reserves (China now holds $3T+)
- Moved to flexible exchange rates
- Reduced reliance on short-term foreign debt
- Created the Chiang Mai Initiative (regional emergency fund)
These changes made Asian economies far more resilient to future shocks.