Thailand’s economy has always been an export-driven economy and existed as a decentralized free enterprise. All the Thai governments have favored an open investment pattern, emphasizing on creating a favorable market for attracting huge foreign direct investments. In the early 1980s and during 1990s, Thai economy was one of the fastest growing economies in the world recording an average growth rate of 9 percent all this crashed during the July 1997 Asia economic crash.

Thailand’s economy was the worst hit during the crisis, dropping by a whopping 75 percent. Until July 2, 1997, the baht enjoyed a value of 25 against the US dollar. But due to the crisis, the baht to dollar rate suddenly dipped to half of its current value. Several major finance companies including the Finance One were unable to sustain this crisis and collapsed. With several foreign investors pulling out their overseas investments from the market, the volatile and corrupt political situation of the country added to this crisis. IMF had to approve a package of around 20 billion dollars in order to rescue the Thai economy.

Until 1997, South Asian countries Thailand, South Korea, Malaysia, Philippines, Indonesia and Singapore were considered the most favorable markets for foreign investment due to high growth rate and heavy returns. Due to certain political developments in the west, investors started removing their investments from the market. This created a domino effect and triggered the economic collapse. There are certain other factors that have contributed to the crash. Rise in the interest rates in US markets, dropping of export growth, and an open and liberal market policy resulted in a loss of confidence in the East Asian markets.