Introduction

This paper starts by reviewing Thailand's 1997 crisis and recovery experiences. Through macroeconomic mismanagement, by mid-1997 the country basically became insolvent in terms of not having enough useable foreign reserves to back up its foreign currency obligations, and had to abandon the basket peg and float the baht. Recovery was slow and was driven mainly by the export engine. Lessons learned from the crisis and postcrisis reforms led to a more risk-averse financial system, and this helped to shield the Thai financial system from the direct impacts of the subprime crisis. However, the indirect impacts through the trade channel have been very severe. The paper highlights the fiscal and monetary policy responses that have been carried out. It suggests that these measures are mainly short-term in nature and have not yet addressed the need to rebalance Thailand's growth path to be sustainable and less dependent on the export engine in the future. The paper ends by discussing some key strategies that could help Thailand achieve a more balanced and sustainable growth path.

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