Updates from the Managing Director

[Wall Street Journal] Radio Silence from the IMF With a growing Asian crisis, businesses and governments worldwide are  looking to the IMF for any sign of action. As of right now, they’ve got  nothing.    Over the past 3 months, economists have turned their attention to a rapidly developing crisis in the East.  With the free-falling Thai baht spurring insolvency, deterioration of trade relations and inflation in Asia,  the crisis does not appear to be contained within the Thai economy. Industrial impacts in South Korea,  Japan, and Indonesia are showing, and governments and businesses around the world have started to worry. Here in Washington, developments seem to be stalled. Despite the submission of a Letter of Intent and  Memorandum of Understanding by Thailand, the executive board of the IMF is yet to let on any sign of  action or progress, with a significant lack of debate on executive action. With the crisis showing no signs  of st...

  [LOIMOU] Bidaya 1

Trade conditions worsen, exporters panic while domestic producers celebrate   With the further depreciation of the Thai baht, Thailand’s quantity demanded for imports has declined  due to a diminishing external value of the Baht (and hence more expensive foreign goods for Thai locals).  This has led to a fall in export demand for trade partners like Japan and Indonesia, with this impact being  the worst in South Korea. In the past month, South Korean exports of electronics, manufacturing materials,  and even basic construction materials like wood and cement have declined by 10.2% as these  export-oriented industries see their long-term profitability being threatened. Smaller enterprises have been  pushed to the brink of insolvency, with a few companies barely breaking even.  Thai manufacturers are ecstatic about such uncompetitive markets, however the general consumer does  seem to think differently. Prices are slowly rising as well, with the...

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.