What crisis followed the collapse of Thailand’s baht peg in July 1997 and spread across East Asian markets?

The crisis that followed the collapse of Thailand’s baht peg in July 1997 and spread across East Asian markets was the Asian financial crisis.

Thailand abandoned its fixed exchange-rate system on 2 July 1997 after intense pressure on the baht. The currency fell sharply, and financial stress spread to Indonesia, South Korea, Malaysia, and other economies. Stock markets plunged as investors reassessed debts, exchange rates, and the ability of companies and banks to repay foreign-currency loans.

Many affected economies had experienced rapid growth funded partly by short-term foreign borrowing. When confidence broke, capital flowed out quickly. Falling currencies increased the local cost of dollar-denominated debt, worsening corporate and banking problems.

The International Monetary Fund organized major assistance programs, including a package for South Korea. The crisis was centered in Asia, although it affected markets and investors worldwide. It is different from the 1998 Russian financial crisis, which involved Russia’s own debt default and ruble collapse.