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The Asian Financial Crisis — 1997 to 2000

The Asian Recovery of 1999

Explain what drove the recovery from 1999 on the IMF's account, why South Korea recovered sooner than Indonesia, and what was still unfinished by 2000.

Before you start

What you'll be able to answer

  1. What drove the recovery from 1999?
  2. Why did South Korea recover sooner than Indonesia?
  3. What was still unfinished by 2000?

Where this sits

The Asian Financial Crisis — 1997 to 2000 · this module is lit

  1. 2 Jul 1997Thailand stops holding the baht at a fixed rate to the dollar and lets it float
  2. 14 Aug 1997Indonesia lets the rupiah float
  3. 20 Aug 1997The IMF approves a loan of about $3.9 billion for Thailand
  4. Nov 1997The IMF approves a loan of about $10.1 billion for Indonesia
  5. Nov 1997Indonesia closes 16 banks
  6. 4 Dec 1997The IMF approves a loan of about $21 billion for Korea
  7. 24 Dec 1997Korea's programme is speeded up
  8. 21 May 1998President Suharto of Indonesia resigns
  9. Aug 1998A crisis in Russia spreads panic beyond Asia
  10. 1-2 Sep 1998Malaysia brings in rules on money leaving the country
  11. 1999Growth returns in most of the region

In December 1998 South Korea paid back part of its emergency loans

A year after South Korea came close to running out of dollars, it paid back part of its emergency loans. In December 1998 it repaid 2.8 billion dollars to the International Monetary Fund (IMF), which lends to countries that cannot pay their foreign bills. The money had come from a facility the IMF set up for countries suddenly losing the confidence of lenders. The IMF took the repayment as a sign that South Korea was getting out of its crisis.

Predict first

Early forecasts mostly expected South Korea's economy to grow by one or two per cent in 1999. What do you expect happened?

In 1999 growth returned, strongly in South Korea and barely in Indonesia

Output, or gross domestic product (GDP), is the value of everything an economy produces. On today's World Bank figures South Korea's output fell by 4.9 per cent in 1998, then grew by about 11.6 per cent in 1999. Malaysia grew by 6.1 per cent in 1999, Thailand by 4.6 per cent and the Philippines by 3.3 per cent. Indonesia's output barely grew.

At first most forecasts had expected South Korea to grow by one or two per cent in 1999, the US Congressional Research Service notes; the service writes reports for the US Congress. Recovery came faster than many observers had expected, the IMF wrote in June 2000. The chart shows South Korea's growth each year from 1995 to 2001.

South Korea's growth each year, 1995 to 2001Real GDP growth, per cent; below zero means output fell
-10-50510151995199619971998199920002001Growth returns, 1999

Source: World Bank, World Development Indicators, GDP growth (annual %), Korea, Rep. CC BY 4.0.