Fiscal policy in Thailand 1997 Financial Crisis
On July 2, 1997 Thai government had to devalue the Baht and started operating a managed float for the Baht exchange rate. The exchange rate went up from 25.09 in 1994 to 47.247 in 1997.
Fiscal policy in Thailand could be classified into 2 sub-periods: before and after 1997 financial crisis. Prior to 1997, the government has shown consistent fiscal discipline in achieving primary surplus over 2.1 percent of GDP. However, after 1997, primary surplus has shown persistent deficit at 1.7 percent of GDP. However, fiscal policy showed remarkable expansion in the past decade particularly during the 1997 Asian financial crisis.
The second Leekpai government, in office from November 1997 to February 2001, tried to implement economic reforms based on IMF-guided neoliberal capitalism. It pursued strict fiscal policies (keeping interest rates high and cutting government spending), enacting 11 laws it called "bitter medicine" and critics called "the 11 nation-selling laws". The Thai government and its supporters maintained that with these measures, the Thai economy improved. In 1999, the country had a positive GDP growth rate for the first time since the crisis.
Please join StudyMode to read the full document