When one talks about ‘Asian financial crisis’, the first thought which occurs is of severe economic crisis faced by Asia in 1997. That crisis was so severe that it raised fears of global economic meltdown.
All of Asia including rapidly growing economies like Thailand, South Korea, Hong Kong, Singapore, Indonesia, and Malaysia needed serious help from IMF in order to stabilize their floundering economies. That period saw rapid decrease in stock prices and real estate and erosion in currency’s value. Demand was severely affected and almost all the countries took long time to recover from that turmoil.
However, crisis of 2008 is not that severe. One of the foremost thoughts prevailing in Asian world was that, Asian economies are decoupled from western world economy. In other words, Asian economies have made themselves insulated from happening in USA and Europe. This belief was based on the fact that, Asia was not facing any problems like subprime mortgage crisis and secondly the pace of growth and development in the region was sufficient enough to tide over any emerging crisis in American market.
However, this belief was proved wrong as American crisis turned out to be much more serious than what one had initially assumed. But in the era of inter-connected economies, decoupling theories don’t hold much merit. Soon, the realization of Asian economies getting affected sunk in and that prompted many countries to urge USA to come up with bail-out packages for revival of sagging economic fortunes of Wall Street giants.
Asian countries including Indian have seen the downward spiral of stock market because of exposure to the western world. Job losses and social unrest are making their voices felt in the emerging Asian economies. Currency values are also going in southward direction. Exports are suffering and demands for goods and services produced in Asian economies are witnessing a slowdown.
Liquidity crunch has hit hard and Asian countries are collaborating with western powerhouses in order to stem the rot. But on the other hand, Asian financial crisis is most likely to result in more power for Asian world including India in world forums. At the same time a greater say in economic affairs is also on the cards. Asian financial crisis is likely to take less time to recover compared to western economies.