As we approach the end of 2022, it is said here and there that Malaysia is experiencing a financial crisis due to the fall of the ringgit to its lowest level.
What exactly is said to be a financial crisis?
A financial crisis is a situation when the value of the main financial asset of the market drops sharply in a short period of time causing panic in the capital market and investors.
Malaysia ever experienced a financial crisis?
The first crisis experienced by the Malaysian economy was in 1973 caused by the surge in oil prices due to the war between Egypt and Israel.
However, the most memorable economic crisis in the history of Malaysia and Asia was in 1997 and 1998.
Before going deeper, let's recall the economic situation in Asia before the black history happened.
In the 1990s, Asia was experiencing rapid growth that saw Malaysia's average gross domestic product (GDP) reach 8.7% per year.
In fact, the inflation rate was also at its lowest level at around 3.8% with the unemployment rate only around 2.5% in 1996.
However, the golden age was destroyed when the financial crisis occurred which affected the economies of the whole of Asia including South Korea, Thailand, the Philippines, Indonesia, Singapore and Malaysia.
In general, this crisis is believed to have started from neighboring Thailand, which then spread throughout Asia and also affected Malaysia.
It is understood that the Thai government's action to change its exchange rate system from a fixed to a floating exchange rate has caused the value of the Baht to fall.
However, there are different views on this crisis that say it happened due to currency speculators.
The name of George Soros was mentioned at that time, who was called a currency crook by Dr Mahathir and was linked as one of the individuals who triggered this crisis.
As a result, there was a massive outflow of capital from the local financial market in Thailand, causing the baht to fall sharply to its lowest level in 30 years.
The Malaysian economy also suffered a profound impact, seeing the value of the ringgit dragged down to RM4.88 against the USD in January 1998 with the stock market falling to an all-time low.
Even so, the suffering experienced by Malaysia not long after it managed to get out of this crisis with help from various parties.
What is the secret of Malaysia's success to rise again?
