Impact of the recent financial crisis to Malaysia, Singapore, Thailand and Korea - Essay Example

Impacts of financial crisis to Malaysia, Singapore, Thailand and Korea Introduction The financial crisis of 2007/2008 in the Asiancountries was fuelled by the poor performance of the America’s financial industry (Kawai, 2012). In the past few decades, major Asian economic powers such as Thailand, Malaysia, Singapore and Korea, had shown the most remarkable economic progress across the world. Unfortunately, Asia suffered a serious financial crisis that paralyzed the economic progress of the countries in the region.

However, the countries stated recovering from the crisis the year 2007 when another financial crisis hit the region making the already bad situation worse. The crisis left devastating impacts on the economies of the four countries (Thailand, Malaysia, Singapore and Korea) as discussed below. Huge foreign debtsThe 2007/2008 financial crisis left the four countries with huge financial debts borrowed from the developed economies (Lin, 2014). Generally, most south East Asian states including Singapore, Malaysia, Thailand and Korea had borrowed huge loans before the crisis to rebuild their economy after the Asian crisis that had happened previously.

The crisis reappeared in a time when the countries were struggling to repay the loans borrowed for economy reconstruction after the Asian crisis. This placed a heavy burden on respective countries thereby retarding their development progress. These states are still paying the loans acquired before financial crisis set foot in Asia. High cost of livingThe financial crisis hiked the cost of living to more than double in the four countries. up to date, the residents in the four countries go through very difficult times because job opportunities are still few and the available jobs are underpaying (Klein & Shabbir, 2007).

Furthermore, foreign investors returned back to their countries and the domestic investment has performed poorly since then. Basically, low investments (both domestic and foreign investments) in a country results in inadequate job opportunities and consequently, high poverty levels.Depreciation of local currenciesThe crisis weakened the local currencies of Singapore, Malaysia, Thailand and Korea which caused these nations a huge fortune in terms of time and resources to reconstruct their economies.

Poor performance of the local currencies made exports cheap wealthy nations seized the opportunity to develop their economies (Jensen, 2010). Moreover, depreciation of local currencies negatively affected local investment due to dumping by foreign investors. Additionally, depreciation of local currencies in the respective states during and after the crisis led to less demand of domestic products and poor performance of the capital market.Deterioration of foreign trade and industrial outputThe crisis led to collapse of many industries and business enterprises and this resulted in low output that was not enough for export (Nelson, 2008).

Additionally, the crisis scared foreign investors and they transferred their production to financially secure economies. Eventually, local production declined due to the unpromising returns on investment and high running cost. In essence the participation of the four countries in foreign trade declined to very low levels. ConclusionThe financial crisis experienced by Asian nations adversely affected their economies. The crisis deteriorated the resident’s living conditions, caused dismal performance of local currency to the international market and left the nations with huge foreign debts.

Other nations should learn from the Asian financial crisis to avoid its adverse consequences. References:Jensen, N. (2010). Nation-States and the Multinational Corporation: a Political Economy of Foreign Direct Investment. Princeton: Princeton University Press.Klein, L. & Shabbir, T. (2007). Recent Financial Crises: Analysis, Challenges and Implications. Cheltenham: Edward Elgar Pub. Lin, C. (2014).National intellectual capital and the financial crisis in Indonesia, Malaysia, The Philippines, and Thailand.

New York: Springer.Nelson, J.et al. (2008). Globalization & national autonomy : the experience of Malaysia. Singapore: Institute of Southeast Asian Studies; Bangi, Selangor Darul Ehsan, Malaysia: Institute of Malaysian & International Studies.Kawai, M., et al. (2012). Implications of the global financial crisis for financial reform and regulation in Asia. Cheltenham: Edward Elgar.