Updates from the Managing Director

The devaluation of the Thai baht in July has begun to take effect in the  domestic economy. Economist Daniel Adams comments. Unemployment is on the rise, with expert forecasts seeing it go from its level of 850,000 a few months ago  to likely reaching 1,250,000 by the end of 1997 before rising to around 1.5 million in early 1998.  With a large part of Thailand’s debt being denominated in the USD, the devaluation of the Thai baht has  led to a bloating of its foreign debt, leading to dipping consumer sentiment and trust in the Thai economy  falling. Furthermore, there is concern that especially in the field of banking reform, Thailand is lacking;  with further bankruptcies, closures and job losses all expected in the near future.    In the month of July, car sales have dropped 67% from a year earlier. Middle-class parents are pulling  children out of foreign universities as fees demarcated in foreign currencies like the Euro or USD inflate...

The beginning of an exchange rate-induced crisis in what was a tiger economy  A shocking tragedy befalls the Kingdom of Thailand as the state proceeded to float its currency following its perceived inability to sustain its peg to the greenback. A series of speculative attacks amounted to a sharp depreciation of the Thai baht, sending ripples across interlinked financial systems in the Asia-Pacific region. Notably, huge current account deficits, growing real estate asset bubbles, lax regulations in the financial sector, and dwindling foreign exchange reserves diminished investor confidence in the currency and the economic strength of the country. Inevitably, compounded with rumours of a currency devaluation, speculative attacks largely undermined the Bank of Thailand’s ability to defend the baht, ultimately floating the currency.