Manage Financial Flow

5.1 Ordinarily, foreign capital serves a crucial driving force in most developing countries’ economic development.  The pace of economic growth in ASEAN-4 therefore slackened to a marked extent in 1997, as displayed in Table 1. Industrial countries, on the other hand, were largely unaffected.  Given a prolonged recession in Japan since the bubble burst, it remains ambiguous how much of her economic showdown in 1997 was attributed to the Southeast Asian financial crisis.

5.2 The correlation between net capital inflows and economic growth is reconfirmed by the data in Table 4 and Table 1.  In 1997 Thailand suffered the most, as net private capital outflows reached 10.9% of GDP, the total opposite of what had happened 6 years earlier (which had seen net inflows of 8-12% GDP p.a.).  That is why her economy came to a standstill in 1997, while other ASEAN members’ encountered only minor setbacks.  Meanwhile, the momentum of economic downturn was more than enough to offset the inflationary impact of currency depreciation.