The Philippines amidst the Asian Financial Crisis
And the Global financial Crisis
Since before, there had been many financial crisis happened, for instance the Great depression of the 1930’s, the U.S recession of 2001 and other financial crisis. All of the country in the world has felt how severely devastating a financial crisis is, on how much problem does it give to an economy, even though the most powerful economies that produce about a quarter of the world output like the America have experienced a financial crisis. Like here in the Philippines, it was affected by the 1997 Asian financial crisis and the latest was the global financial crisis. During those times the Philippines undergo several problems that any country would incur during a financial crisis, similar to depreciating of currency, decreasing GDP, rising of unemployment rate and other macroeconomic indicators. (Khandkler, 2002, p 224) “Concludes that the effect of the crisis, may be seen in rising unemployment and underemployment and in the deterioration of quality of jobs.” This paper will compare on the 1997 Asian Financial crisis and the recently crisis of 2007 global financial crisis, on the cause and effect on the Philippine economy. Before the Asian financial crisis happened the growth of Asian economy was called “Asian Economic Miracle” by the IMF and the World Bank, because of its quick and high economic growth and remarkable living standards with very low incidence of poverty and unemployment rate, compared with other outstanding periods in history, the Asian growth was unprecedented, thus attracting approximately half of the total capital inflow to developing countries increasing its capital investment, resulting from receiving large inflow of money. The Asian financial crisis sometimes called as Tom Yum Goong crisis". The crisis hit the emerging economies, like the four Asian tigers, Hong Kong, Singapore, South Korea, Taiwan and other South East Asian countries. It happen in July 1997, that was started from Thailand with the collapse of its currency depreciating, Thai Baht that was caused by the government decision of floating its exchange rate and called the International Monetary Fund (IMF) for technical assistance that made its currency rapidly depreciated, thus cuttings its peg to the USD, and triggering the Asian currency crisis causing of fear of worldwide economic meltdown and financial shocks. During that time Thailand had obtain a huge amount of foreign debt that made the country gone bankrupt, as the crisis spread most of the Southeast Asian countries see a decrease in their own currency, devalued stock market and other asset prices and steep rise of private debt. The Asian financial crisis reduced economic growth from a double-digit rate to a negative rate which affected the lives of several million of people in the region. In Indonesia, South Korea and Thailand were countries are most affected. Hong Kong, Malaysia, Laos, and the Philippines were also affected by the crisis, while China, India, Taiwan, Singapore, Brunei, and Vietnam were not quite affected. The IMF created chains of bailout or rescue packages in order for the most affected economies to avoid defaulting, in order to restore the Asian currency, banking, and financial systems. Also IMF aids a $40 billion program to stabilize the currencies South Korea, Thailand and Indonesia that were hit hard by the crisis. (http://www.wikipedia.com) The recently crisis in June of 2007 the global financial crisis that have affected almost all countries, the crisis caused by the United States of having Housing bubble which peak in 2005-2006. The United States have a loan packaging and incentives to borrowers and made the borrowers to think that they will be quickly refinanced. Making a high default rates on mortgage lending to people who have low credit ratings called subprime mortgages. Having an increase of low interest rates and inflows of foreign made an increase...
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