Post on 16-Apr-2017
GROUP MEMEBERS • SHANIKA DILRUKSHI
• SACHIN ABEYKOON
• SACHINI UDUGE
• UGEEMA DE SILVA
• SHAKTHI DISSANAYAKE
• AVISHA SENEVIRATHNE
• PIYATH GUNAWARDENA
• SINTHUJA ESWARAN
FINANCIAL CRISIS
Situation of a country’s economy when they find themselves in an
unmanageable lifestyle
Debt of a country equalizes to the income of a nation.
It causes devaluation of currencies and stock
ASIAN FINANCIAL CRISIS
Unsustainable lifestyle was maintained in Asian markets
Aroused in July 1997
Also called Asian contagion
It began and spread throughout Asia resulting currency devaluations
ASIA BEFORE FINANCIAL CRISIS
Asian countries had an extraordinary records of economic performances in 1994-1997
Asian markets went through:
Fast economic growth,
Low inflations,
Strong financial positions a stability
Increases saving rates
Open economies
Blooming export divisions
flourishing Asian markets did not predict any financial crisis
BEGINNING OF ASIAN FINANCIAL CRISIS
Began from Thailand (Tom Yum Goong crisis)
IMF (International Monetary Fund)
Thailand Authorities was notified about the upcoming crisis by IMF
Convincing Thailand was a failure
IMF assumed that the Thailand were tolerable to the crisis.
Occurred due to the shortage of foreign currency to upkeep its stable
exchange rate.
AFFECTED COUNTRIES
All countries underwent a loss of demand and self-confidence
But in a different degree of impact
Highly affected countries:- Indonesia, South Korea, and Thailand.
Moderate impact to :- Hong Kong, Malaysia and Philippines.
Least impact to :- Japan, China, Singapore and Vietnam.
AT THE END OF ASIAN FINANCIAL CRISIS
This crisis spread throughout the Asian markets.
It caused:
Collapsing currencies
Stock market crashes
Devalued assets
Reduced import revenues
Increment in private debt
ROLE OF IMF AFTER THE CRISIS
Adopt to protective strategies to safeguard the stability of their own currency.
Affected authorities requested help from IMF
IMF
provided financial assistance
provided the biggest loans in its history.
and the World Bank then secured the financial stability
(1)
Low interests were provided for funds in Asia
Investors shifted extensive amounts of foreign funds
Asian underwent economic boom
But there was a poor corporate control and weak investment systems
It left the foreign capital unproductive.
(2)
Acquired dollar-denominated debt.
Fixed exchange rates
pictured them an incorrect sense of safe keeping
(3)
Exports of Asian countries were weak
Because of the: Indebtedness of US dollar in compared to Yen Weakening value of china’s Yuan in 1994 NAFTA following market collapses
extensive foreign funds and wilting exports
enlarging account deficiencies
IMPACT OF ASIAN FINANCIAL CRISIS TO DIFFERENT
COUNTRIES
THAILAND
IMPACT TO THAILAND
Huge downsizings in financial assets, constructions and stocks
Population was left unemployed
600,000 foreign employees left Thailand
75% dropped in Thai Stock market
Thai finance companies collapsed
IMF ROLE TO THAILAND
Provided a helping hand to Thailand
Provided a set of loans and investments.
THAILAND AFTER THE FINANCIAL CRISIS
Stabilized its budget
Paid off their debt to IMF
PHILIPPINES
Philippines Pesos (PHP) is the currency of Philippines
PHP was devalued from 26 ₱ to 55.75 ₱ against 1 US dollar
Later after the PHP was appreciated to 53 ₱ in 2001
And PHP was appreciated to 41 ₱ in 2007
MALAYSIA
IMPACT TO MALAYSIA
Malaysian ringgit (MYR) is the currency of Malaysia
Devaluation of Thai baht in July 1997 increased demand for MYR
In 1997 MYR devalued from 2.50RM to 4.57RM against 1 US dollar
GDP dropped by 6.2% in 1998
Ultimately Malaysian economy dropped the country to collapse.
HOW MALAYSIA OVRCAME
Various protective measures were taken into action
Malaysian authorities imposed capital controls
Pegged the ringgit at a value of 3.8RM to 1 US dollar.
They refused the aids of IMF
Established different task force agencies.
JAPAN
Japan markets were also hit but the markets did not collapse
40% of the Japan’s exports were sent to Asian markets
Japan had to run on a trade deficit
This decreased the Japanese GDP growth rate from 5% to 1.6%
Led to an increment in bankruptcies in Japan.
1950 SEOUL 2015
Shutting down all the merchant banks.
Economy collapsed quarterly at an average rate of -6.65%.
The finance sector was loaded with non-performing loans for aggressive
expansions.
Excess debt of Chaebols’ directed them to failures and takeovers.
The Seoul stock exchange fell by 11.2%
$5 billion venture of Hyundai Motors, Kia Motors. Samsung Motors was dissolved due to the crisis.
The South Korean won decreased to more than 1,700 per U.S. dollar from around 800.
• Nation’s financial problems were handled with the arrangements by the South Korean
government and debt exchanges.
• Much of South Korea's recovery from the Crisis was credited to labor modifications and
alternate funding sources.
• GDP growth had risen to 5.4% by the first quarter of 1999, and strong growth in currency lead
to an annual growth of 10.5%.
In order to provide a helping hand to South Korea IMF
offered USD $21 billion loan as a part of USD $58.4
billion bailout plan by December 1997.
This lead Koreas situation even worse.
After the Financial Crisis, many are aware on preventing such in Future.
Prof. Gray B. Gorton’s new type of test for financial institutions and banks.
Central Banks potential to end future crisis with their experiences on 1997.
The design of '' Dodd Frank Act'' to prevent future financial crisis.
CONCLUSION
1997 Asian markets were living an unmanageable lifestyle
began with Thailand and was spread through the Asian markets
Major reasons
extensive amounts of foreign funds
fixed exchange rate
poor corporate control, weak investment systems
less exports
ASIAN CRISIS CAUSED:
a devaluation of currencies
led to stock market crashes
reduced the trade revenues
increased their private debt.
LATER ASIAN MARKETS:
increased tax revenues
stabilized their financial markets
paid off the debts to IMF.
IMF provided loans and investments.