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20 Years After The Asian Financial Crisis: Five Differences Between Then And Now

Much has changed since IMF staffers landed in Asia 20 years ago to extend bailout funds in exchange for tough reforms. Regional central banks tend to have sufficient, if not excessive, foreign-exchange reserves to meet short-term liabilities. Exchange rates no longer hinge on brittle and artificial U.S. dollar pegs, but in most cases trade freely enough to reflect underlying economic risks and interest-rate differentials. And much more attention is paid by regulators to currency and maturity mismatches in bank loans.

If risks have taken on new shape, they have not disappeared. In this report, S&P Global Ratings looks back at the Asian Financial Crisis with the aim of informing the present. We note that in the run-up to the crisis two decades ago, obvious dangers were overlooked. Are today's risks similarly being disregarded?


  • We downgraded regional sovereign ratings during the Asian Financial Crisis; some countries have never returned to pre-crisis ratings.
  • Market and debt structures are more credible and flexible, and in the past two decades the region has amassed protective barriers of foreign-exchange reserves.
  • Asset prices look as bubbly, if not more, than 20 years ago.
  • There is a greater dependence on China for growth, exports, and investment flows.
  • Some bank vulnerabilities look similar to pre-1997, but balance sheets are sound and governments remain highly supportive in many countries.

With this question in mind, we examine five differences between then and now. The process starts with our own ratings. How do we see the region's levels of creditworthiness in 2017, compared with 20 years ago? We also look at external vulnerabilities; asset prices; and comparative growth drivers. Finally, we turn to the banks. While an impending banking crisis does not reflect our base case or our downside scenario, we believe such a scenario is neither implausible nor highly remote.