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Abstract
This paper analyses the downturn in the Thai economy from the onset of the currency crisis to current day. The focus is on the economic crisis in Thailand and its impact on the current account deficit, external debt, collapse of the property sector, political instability, the domestic economy, and exports. Discussion is also provided on how much of the economic crisis in Thailand can be attributed to specific development strategies of previous governments; how much of it to intra-region competition for market share and foreign investment; and how much is related to easy credit policies by relaxing fiscal and strongly interventionist monetary policies.
Introduction
Many economic analysts predict the economic crisis in Asia and Thailand will get worse before it gets better. At the end of November 1997, the Thai Finance Ministry expected the Thai Economy to grow by 0 to 1 percent in 1998, compared with 6.4 percent in 1996 (Far Eastern Economic Review, December 18 1997). However, some observers were even more despairing. For example, the Organisation for Economic Cooperation and Development (OECD) predicted the economy would shrink by 1 percent in 1998, and the Industrial Finance Corporation of Thailand (IFCT) forecasted a contraction of 5.6 percent. However, the actual economic results were even worse than many predicted. According to the Far Eastern Economic Review, July 22 1999, the Thai economy shrank by 1.3 percent in 1997. Furthermore, they predicted that the Thai economy would shrink by another 8.0 percent in 1998 followed by a further shrinkage of 0.5 percent in 1999. Positive economic growth for the Thai economy was only expected in the year 2000 with 2.2 percent being predicted. Moreover, many companies are expected to fail and close their doors thus increasing unemployment well beyond the 2 million mark (Thammavit, 1998).
1. Literature Review
Thailand's distinction of being the first of the Southeast Asian economies to collapse identifies the tenuous nature of Southeast Asia's capitalist boom. Thailand was praised by the World Bank as being outward looking, receptive to foreign investment and having a market-friendly philosophy. Whilst being receptive to foreign investment did make Thailand a home for Japanese manufacturing, leading to the late- 1980's boom, this same receptivity was instrumental in Thailand's recent collapse (Bhatia, 1998).
Following...