South Korean Financial Crisis - Case Study Example

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South Korean Financial Crisis

Korea was progressing well in 1996 and had become a part of the Organisation for Economic Cooperation and Development (OECD). As people celebrated, nobody knew of the impending disaster about to strike. During the latter part of 1996, the current account deficit increased to 5% from previous year’s 2%, a decrease attributed to lessened competition among Korean industries. The GNP declined from 14.1% to become 7.1% and foreign debt rose to a high 100 billion dollars. These and various other debt related indicators were showcasing the upcoming crisis for Korea. The first half of 1997 surfaced a few more indicators of the disaster. Foreign investors in Korea were starting to get wary of the market and lacked confidence in investing because of long recessions, large deficits in current accounts and growing short-term external debt. In January 1997, Hanabo Steel, the 17th largest Korean seller went into bankruptcy. Soon the Sammi Group, another steel company, failed and major affiliates of the Jinro Group went bankrupt. In July 1997, another major automobile manufacturer, Kia motors failed. With the downfall, foreign capital began to flow out of the country. In July 1997, the Southeast Asian crisis broke out first in Thailand, followed by Indonesia, Malaysia and in Hong Kong in October as the stock market crashed. Within October to December, the Korean economy crashed by 112% compared to the US Dollar. ...
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In this case study the author aims to outline the chronology of the events that took place leading to the eventual financial crisis and in continuation, identifies and discusses the causes and effects of the Financial Crisis based on the South Korean economy…
Author : hegmannjensen

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