The impact of the 1997 Asian financial crisis remains a frequent topic because it was a period when Thailand's financial sector faced severe challenges. On 2 July 2026, it marks the full 29th anniversary of the historic announcement by the Bank of Thailand to float the baht.
Before 1997, Thailand's economy was growing rapidly and considered a star in Asia—a golden era where businesses prospered and the country advanced. As foreign trade expanded, the current account deficit surged to $14 billion.
Financial institutions and businesses, following financial liberalization, increased foreign debt. They borrowed short-term abroad at lower interest rates than in Thailand but extended these as long-term loans (at a time when bank deposit rates were as high as 10% per year). The real estate sector boomed with rampant speculation. Banks granted loans more easily than today, while the baht was fixed at 25 baht per US dollar.
However, Thailand's economy had several underlying problems. When foreign investors attacked the baht, the country suffered significant losses. The Bank of Thailand (BOT) explained the event as follows:
During the baht attack, investors aimed to undermine confidence in the currency, exploiting Thailand's weak economic fundamentals—large current account deficits and high short-term debt relative to foreign reserves—to spread rumors of a devaluation. When the market believed these rumors, massive selling of the baht for US dollars occurred.
The BOT used $24 billion of official reserves—two-thirds of its total reserves—to defend the baht, reducing reserves to just $2.85 billion, a very low level compared to $38.7 billion at the end of 1996.
Ultimately, patching the leaks became impossible. On 2 July 1997, the BOT announced the floating of the baht, which moved from 25 baht per US dollar to over 55 baht per US dollar at times. Those with dollar-denominated debts saw their repayments more than double in baht terms. At that time, news spread of bank failures requiring mergers and the bursting of the real estate bubble.
On the Stock Exchange of Thailand (SET) the crisis hit hard. Before the baht floated, the SET Index had reached 1,789.16 points in 1994, but after the floating in July 1997, it plunged to 204.59 points by September 1998. Investors suffered heavy losses and recovery was slow due to the crisis's broad impact.
The SET Index took 24 years to surpass its previous peak, finally exceeding 1,789.16 points in January 2018 (closing at 1,588.23 points on 30 June 2026).
Although the Thai stock market took a long time to recover, the crisis also gave rise to many value investors (VI), includingDr. Nivesh Hemachiravarakorn, who manages a portfolio worth tens of billions.He built his portfolio by selecting quality stocks that had temporarily declined due to short-term factors. This suggests that crises always present opportunities if one studies the information carefully.
After the crisis, financial and stock market regulations became much stricter, introducing rules on deposit reserves, deposit protection, and Circuit Breakers—automatic temporary trading halts. These are just some of the changes following the crisis.
For everyday people, a clear effect after the COVID-19 crisis was that people tightened spending, planned finances better, and prepared emergency funds to cope with unexpected events. Since national-level crises cannot be prevented, it is essential to diversify risks to overcome any crisis safely and securely.
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