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Inflation In Thailand And Indonesia And The Asian Financial Crisis

617 words - 3 pages

There is a close relationship between Gross Domestic Product (GDP) and the unemployment rate as it will relate to the decrease or increase of inflation rate. The inflation rate will increase when GDP and unemployment decreases, because it will affect the purchasing power of the people of a particular country.

From 1997 to1998, both countries : Thailand and Indonesia reached their highest peak of inflation, which is 9.24% and 75.27% respectively. It is caused by the Asian financial crisis which hit most of the asian countries. The crisis is started in Thailand as its currency, Baht is attacked by the currency traders, and eventually devalued after they found out that the market is unstaintable. For Indonesia, the nation belived that It is triggered by a sudden flow out of assets and money from Indonesia. Hence, the value of Rupiah and Baht moved sharply lower and led to a high inflation rate. It also brought about severe unempoyment rate and caused proverty to strike the country.

The inflation rate of Thailand was the lowest during 1998. From 1997 to 1998, to solve the Asian financial crisis which caused a rose in inflation rate, the government tried to apply economic reforms based on IMF-guided neoliberal capitalism by keeping interest rates high and cutting government spending. Besides, the government also imposed laws that are called "bitter medicine" and "the 11 nation-selling laws". With their effort, the economy had finally improved, and the inflation rate dropped to a negative value of percentage value, that is approximately -4.04%. On the other hand, Indonesia experienced inflation rate in 2012 that was the lowest (4.53%) in the past 20 years. At this year, the government had spent 211 trillion rupiah to slash costly fuel subsidies, hence the inflation rate is reduced. Besides, a declining...

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