On July 2, 1997, the depreciation of Thai baht triggered a regional financial crisis that swept most of Southeast Asian markets and caused serious economic damage to the countries in this area. From then on, Southeast Asia's financial market has been very sensitive, worrying if the crisis may recur.
Therefore, some neighboring governments were forced to raise rates and appreciate their currencies to adjust the macroeconomic foundation. Meanwhile, they encouraged foreign investors, explaining the stability of market liquidity and expatiating the economy immunity. Apparently, they are afraid of a rapid withdrawal of foreign capital.
By and large, during the fist six months of 2008, through various policy adjustment, Southeast Asia managed to live amid an atmosphere filled with negative economic factors, but it is still far from to say "have avoided a crisis". Thailand's leading economy think tank the Kasikorn Research Center said in a recent report that risks still remain in the deep economic structure of Southeast Asian countries and they could be triggered off if more misfortune happens during the latter half of the year.
The report said if Vietnam could not control its slipping economy in the near future, foreign investment and capital that poured into Vietnam during the past years could be withdrawn by a large scale and at a rapid speed. It will effect foreign investment of neighboring countries since the whole confidence of foreigners to the regional market is getting lower and lower.
As a result, various governments in the region dropped its forecast growth for 2008. Thailand and Malaysia changed its forecast from 6 percent to 5 percent, the Philippines changed from 6.3 percent to 5.3 percent, Indonesia from 6.4 percent to 6 percent while Singapore from 4.5 percent to 4 percent.
All indications, now, are that the Southeast Asian economies, burdened with debt and under constant pressure for corporate and financial restructuring, amid stock market and currency turmoil, are risking with financial problems, both from inner and outer. How to draft a series of cautious, active and flexible policies is the most effective way to leave the edge of a potential crisis.
(Xinhua News Agency July 3, 2008)
