To what extent was the Asian financial crisis predictable? Discuss the current situation in the region.

Another reason why people did not believe that the economy was ever going to suffer was because of the fact that there currency was pegged. A lot of people believed that since their currency was pegged to America it meant that if American economy suffered then they would suffer. People did not understand the basis of the peg and how it worked and only believed that if the American economy crumbled then it would effect them and they thought that America was all mighty and that it could never crumble thus had faith in there economy and currency. In reality the currencies were dramatically overvalued and the peg was nothing but an illusion the help people believe that their currency was a powerful one, but in fact it was severally weakened by the amount of power the banks were perceived to have. This was clearly evident in Thailand, Philippines, Malaysia and Indonesia and it was taken advantage of by currency traders who kept purchasing there currencies and the countries were unable to purchase them back thus leading to an eventual dilemma.

But it must be taken into account that although a large extent of the population did not see the problems it does not mean that it was over unpredictable. People within the World Bank and IMF did bring up the problems to the governments in the region but the governments felt so confident and sure that they ignored the advice that they were receiving. World Bank noticed the indication of a massive imbalance of the macro-economy and the performance that helped the economy become so successful was deteriorating. This led to there continuos advice to the Asian region to stop loaning and to decrease the value of there currencies before they plummeted without limits, but it was ignored and thus the countries paid the price for being over convinced with the power of there economy.  

Also once the currency traders had traded the Thai Bhat until its value was of little value it was obvious that they would take Asia by storm and cause havoc to the economies of the region. Thus the predictability was obvious once the havoc had started, if countries had foreseen the events in Thailand as a warning and taken safe measures to protect there economy then they would have not been hit so hard. But it was inevitable that the countries in the region were going to be swept aside by the speculators and that the strength of their currencies was going to crumble. Thus to an extent the crisis was predictable to raise havoc across the continent once the crisis had began in Thailand.

The current situation in the region is fairly different within each country. Thailand who was first hit by the crisis has been said to have first out of it. The economy has re-structured itself and banks are in the process of nationalisation, the country is trying to resolve its debt problem and its currency is significantly weak compared with other countries in the region. But overall the economy is still weak and this is clearly shown by its low living standards which has reduced 10-15% since the beginning of the Asian crisis, this clearly shows how bad the country was hit by the climax.

The Philippine economy was one of the least scathed during the crisis, this is because of the links it has with American. It continuos to exports a large percentage of its exports to America which means it does not rely heavily on exports within the region. The big problem in the Philippines is its large foreign debt that has caused its currency to fall and thus cause its overall debt to build up. Worst is that the economy has started to run a budget deficit as the economy has slowed down and moved towards zero growth.

In Hong Kong the peg which is still in put is causing most problems. The government is currently operating at a loss and thus is being forced to increase tax and thus causing social problems within the city to rise. The city is drying up as an economy as no money is coming into the city and thus leading to high interest rates. But in order for the city to survive it must use a monetary policy to decrease its interest rate and also it must de-peg itself from the American currency to increase its competitiveness within the Asian region.

Overall the current situation in the region is varied, in Southeast Asia the countries have seen off the crisis and are trying to re-build there economies, the low currencies means that tourism has been high in this region and also a large amount off Foreign investment has started to occur within the area. In Hong Kong, the after-effects of the crisis are only being felt now as unemployment has started to rise to soaring rates and the peg has started to cause its problems. In Japan and Korea the high inflation and currency rates are the problems that are plaguing them from high growth rate. China is only now starting to fall into a depression stage as its growth rate deteriorates and thus leads to a regional crisis to occur as so many nations rely on exports and imports from China.