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We spoke with Supavud Saicheua, Head of Economic Research at Phatra Securities, about Thailand’s role in the Asian financial crisis. In our conversation, Supavud discusses the economic and financial risks that developed in Thailand during the 1990s and how they led to the crisis. He also explains how the Thai economy has changed in the decades since the crisis and what risks remain today.   

Some of the key takeaways of our conversation with Supavud include:

• After a long period of stability, Thai borrowers had excessive confidence in the stability of the exchange rate and took on large amounts of foreign currency debt.
• When investors lost faith in Thailand, they began to notice similar problems in other Asian economies, causing the crisis to spread across the region.
• The policy reforms recommended to Thailand after the crisis led to a sharp increase in interest rates, putting further stress on banks and companies.
• Thailand’s recovery was slower than other Asian economies due to its aging society, increasing competition from other economies in the region, and political unrest in the wake of the crisis.
• Leverage plays a key role in all financial crises, including the Asian financial crisis.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System