Tracing 4 Global Crises That Shook Thailand’s Economy

Thailand has faced several economic crises over the years, but no matter how severe, we have always managed to get through. The lessons learned from the past help us better navigate future challenges. Let’s take a look at each crisis, what caused it, how it impacted Thailand, and how long it took for the country to recover.

1. The Persian Gulf War Crisis (1990-1991) - Oil prices soar, stocks plummet

The Persian Gulf War began when Iraq invaded Kuwait, accusing Kuwait of stealing oil and selling it to the United States. As a result, the allies intervened, causing global oil prices to skyrocket to $140 per barrel.

Impact on Thailand:

Rising oil prices increased business costs and the price of goods.
The Thai stock market dropped from 1,129 points to 544 points within just a few months.
Investment slowed down due to higher costs. Although the war ended in 1991, Thailand’s stock market took more than 3 years to recover and return to 1,129 points.

2. The Tom Yum Kung Crisis (1997-2002) - Currency collapse, massive unemployment

Before the crisis, many Thais borrowed heavily from foreign banks to invest, particularly in real estate and stocks, hoping for high returns. But when they could not repay their debts, the situation collapsed.

What happened:

The Bank of Thailand tried to keep the Thai baht stable, but eventually had to let its value change freely. The baht quickly went up in value, rising from 25 to 56 baht per dollar.
Companies that had borrowed in U.S. dollars collapsed like a domino effect.
Millions of people lost their jobs due to the bankruptcy of businesses. The Thai economy declined for four straight quarters, and it took more than 5 years to recover to its previous state.

3. The Subprime Mortgage Crisis (2007-2008) - Global financial crisis hits Thailand hard

This crisis had global effects. It began on September 15, 2008, when the U.S. financial giant Lehman Brothers collapsed due to subprime mortgage problems, which were loans given to borrowers with poor credit. When it failed, the entire financial system collapsed.

Impact on Thailand:

The Thai stock market dropped from 927 points to 380 points within a year.
The baht weakened, and foreign capital flowed out of the country.
Exports slowed down, as the U.S. was an important market for Thailand. While this crisis wasn’t as severe as the Tom Yum Kung Crisis, it still took Thailand about 2 years for the stock market to recover and reach 900 points again.

4. The COVID-19 Crisis (2020-2021) – Lockdowns caused the economy to stop

COVID-19 started spreading in late 2019, but its serious effects were felt in 2020 because of lockdowns. This stopped businesses and caused major damage to Thailand’s tourism industry, which is a key source of income.

Impact on Thailand:

Over 192,000 companies faced liquidity problems.
A massive number of people lost their jobs, particularly in tourism, hospitality, and restaurants.
Inflation increased, causing higher costs and business expenses.

The Thai stock market was also hit.

It dropped from 1,589 points to a low of 969 points in March 2020.
It recovered to 1,600 points in March 2021. Although there were subsequent waves of COVID-19, investor confidence did not significantly decrease, as government and private sector support measures were in place.

What is important is that we must learn from the past to reduce future risks. Even though crises may arise again, if we plan well and have strong measures in place, Thailand can recover as it has in the past.