1. Introduction
The 1997 financial crisis provided many lessons about the weaknesses of Thailand’s economic and financial system before the crisis, weaknesses that eventually led to the crisis. Since then, these lessons have led to many economic and financial reforms. Some of the reforms, such as the floating of the baht, were necessitated by the crisis. Others evolved from lessons that were learnt from the crisis, and were designed to make the financial system stronger and more resilient to risks that could lead to a similar crisis in the future. This paper provides an overall review of the lessons and reforms that have been carried out. These include improvements to the data system needed for adequate macroeconomic monitoring, changes to the macroeconomic management framework and monetary policy regime, and various aspects of financial sector reforms. Many of these reforms are still, however, incomplete and will require additional measures or legal frameworks to make them fully effective. The paper also indicates the lessons that might not yet have been sufficiently learned and new risks to future economic stability. These include political interference in financial institutions, leading to inappropriate or excessive lending, and lack of transparency in fiscal liabilities that could mislead macroeconomic management.
The next section briefly reviews the evolution to the financial crisis in Thailand. The paper then looks at crisis resolution measures that were adopted immediately after the crisis in sector 3. Lessons and more fundamental reforms of monetary policy and the
financial system are covered in covered in Section 4, and the lessons that appear to have not yet been learned and new types of risks to economic stability are covered in Section 5.