What are the main differences between how the 1997 Asian Financial Crisis and the 2008 Global Financial Crisis affected the Philippines?
Answer (1)
The Philippines was affected by both the 1997 Asian Financial Crisis and the 2008 Global Financial Crisis, but the impact of each crisis was very different in both cause and effect.The 1997 crisis was mainly a regional problem that began in Asia, especially in Thailand, Indonesia, and South Korea. It was triggered by currency devaluations and too much foreign debt in the region. In the Philippines, the peso lost value, the stock market dropped, and foreign investments slowed down. The government had to raise interest rates to defend the peso, which made borrowing more expensive. Many businesses struggled, and people lost jobs. Banks were also affected because they had given out many loans that could not be paid back.In contrast, the 2008 crisis was global in scope. It started in the United States due to problems with subprime mortgages and risky financial products like CDOs. When American banks failed, the crisis spread worldwide. However, the Philippines was not as badly affected in 2008 because it had stronger banking regulations by then. Lessons from the 1997 crisis had led to reforms. Filipino banks had fewer bad loans and more capital reserves.Another big difference was the role of Overseas Filipino Workers (OFWs). In 2008, even as many countries were in recession, OFWs continued sending money home. This helped families maintain their spending, which kept small businesses alive. During the 1997 crisis, remittances were smaller and had less impact.In summary, in 1997, the Philippines was vulnerable and hit harder because the crisis was centered in Asia and the country’s financial systems were weaker. By 2008, the Philippines had become more resilient thanks to reforms, OFW remittances, and more responsible banking practices. The two crises taught valuable lessons about preparedness and good governance.
