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The Financial Meltdown In 1997 Came As Surprise To Many Governments, ...

The financial meltdown in 1997 came as surprise to many governments, financial and political experts, although there are factors that explain how it happened even if it could not have been avoided. Political stability and the determination of governments to promote economic growth had arguably assisted high economic growth in the East Asia region. The growth strategies of countries such as Japan, Indonesia, Singapore and South Korea seemed to show the way forward, not only for East Asia but also for developing countries in other regions such as Africa. In ASEAN the region had an organisation that seemed capable of promoting economic co-operation and growth. The de-valuation of Thailand currency proved to be the catalyst for the financial meltdown across East Asia. A combination of factors can be used to explain how financial meltdown hit East Asia. The economies of East Asia were not as strong or well developed as their growth rates suggested they were. Inadequate financial regulation and even corruption weakened some economies, or even decisions made to protect the interests of political or the economic elite, rather than promote economic policies to improve the situation of the whole country. There was complacency amongst the strongest economies of the East Asia regions that they could avoid the worst effects of international recessions and still sustain high levels of economic growth. In the end though, it was not an international recession, but the loss of confidence in East Asia, started in Thailand, which was the main trigger for the financial meltdown in that region in 1997. Declining confidence and currency speculation was instrumental in seemingly ending sustained economic growth in the East Asia region.
The implications for the financial meltdown in the East Asia region were political and social as well as economic in nature. The financial meltdown affected the confidence that the governments of the region and economic ministries would be able to sustain high levels of economic growth over a long-term period. South Korea, Thailand, Malaysia, and Indonesia were the countries most adversely affected by the financial meltdown. Although the implications for the East Asia region could have been much worse if financial rescue packages had not been put in place. The scale of the meltdown had been considered to be vital. Financial aid meant that recovery occurred faster than could have been expected, given the size of the crisis in 1997. The financial meltdown highlighted structural weaknesses within the economies of East Asia. The main implications for the region were that if those weaknesses were not addressed then the East Asia region could be prone to further economic crisis. Without reforms any renewed levels of economic growth will not be sustainable for any long periods of time.


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