7. The turnaround in the current account and in the country’s foreign reserve
position was achieved at very high cost in terms of a severe economic contraction. Real GDP
growth started to decline from the second quarter of 1997 (table 2), and it is estimated that
real GDP growth declined by about 8.4 percent in 1998. It could be argued that the
economic contraction and attendant social impacts could have been less with an alternative
recovery package, for example with less stringent monetary and fiscal targets as had been suggested by Sachs (1997). However, it is very unlikely that the country’s solvency could
have been achieved without a certain amount of economic contraction.