Financial Crisis in South Korea

Timeline of South Korea

Period: Jan 1, 1996 to Dec 31, 1999

South Korea shows high current account deficit

Dec 2, 1996

The average current account balance deficit in South Korea was 5.2 percent of the GDP in 1996. The five biggest economies effected (Indonesia, Malaysia, Philippines, South Korea, and Thailand) had received net capital inflows of $93 billion in 1996. (Gerber)

Chaebol bankruptcy

Jan 2, 1997

Chaebol is a term used for family-owned enterprises in South Korea. These chaebols run the country and hold a big portion of the country's economy. The fourteenth largest chaebol, Hanbo Group (amassed $4.39 billion debt in steel units) had gone bankrupt. Because of corruption and mass debt, it caused up to ten of the top thirty chaebol going bankrupt. (graduate institute)

The Asian Crisis Begins

Jul 2, 1997

The Asian Financial Crisis begins in Thailand July 1997. The first of the five countries that were greatly impacted. (Gerber)

[FAMILY] Struggle Starts

Aug 2, 1997

I was born and raised in New Jersey. However, my father was in the import/export business when I was younger and often traveled back and forth from the US to South Korea. Also, my mother's side of the family lived in Korea their whole lives. At this young age of 7, my family started to struggle.

South Korea asks for aid.

Nov 21, 1997

South Korea requests for IMF aid. Nationalists in South Korea argues that requesting aid is humilitating.

[FAMILY] Crisis hits

Dec 2, 1997

Once the financial crisis hit South Korea, it started the problems for our family in the US as well. Once it hit, my father's business was having a tough time. He went back to Korea at 4 months at a time and came back for a month continuously.

South Korea goes into Crisis

Dec 2, 1997

South Korea hits a financial crisis. "Over-capacity led to Over-borrowing". South Korea was also effected by Thailand causing for foreign investors to pull out of Korea. South Korea hits a record 2,000 won to dollar ratio from an former 844 won to dollar ratio. (Hofstra) The five economies face an outflow of $12 billion (from the former inflow of $93 billion) which cause a turnaround of $105 billion in one year. (Rodrik)

IMF gets involved

Dec 3, 1997

The IMF (International Monetary Fund) finances /helps countries that are in need. The IMF approves of the lending of the money to South Korea for about $57 US billion. The IMF got involved and took control of the country in terms of owning many of the businesses at the time. (IMF.org) (graduate institute)

Start to Recovery

Feb 2, 1998

South Korea quickly got to try to recover from the crisis. It started with the election of President Kim Dae Joong (who eventually won the Noble Peace Prize) in Dec. 1997. Korea reached an agreement with foreign banks to extend maturity of short term claims on its banks to avoid default, which helped to stabilize the won and avoid a depreciation spiral. (imf.org)

[FAMILY] OTHER FAMILY ASKS FOR HELP

Mar 2, 1998

Around this time, my mother's side of the family were having a difficult time. They needed aid from my direct family. I remember my parents always talking about bringing a certain amount of money back to Korea to help my mother's family. They use to set aside a certain amount for them. They used to talk about how so many businesses closed down and the problem of "IMF", They would talk about all the suicides that have occured during the time.

Unemployment Rate Rises

Apr 2, 1998

The unemployment rate jumped up to 8.5% from 2.5% the previous day. This caused about 10,000 layoffs a day. There were at least one small-business owner committing suicide a day. (graduate institute) It got to the point that the major corporations asked employees to sell jewelry to help the country raise foreign currency and pay off debts.

IMF announces it will ease conditions

Jul 28, 1998

After the IMF changed the foundations of its IMF $57 billion recovery package to South Korea five times, IMF had finally announced that they will ease conditions because of the unemployment rate and overburdened welfare program. (graduate institute)

South Korea finally sees growth

Mar 30, 1999

South Korea finally sees growth in the first quarter since 1997. (graduateinstitute)

[FAMILY] PROBLEM IN US

May 2, 1999

It hit our family really big at this point. We never got to eat out and always had cheap food because of the help that my parents were giving to my other family. I would not be allowed to eat Burger King or Mcdonalds but rather just stick to the basic Korean food given at home. I realized at this young age of 9, that was the hardest time my family was having.

International Markets get optimistic

May 20, 1999

International Markets finally seemed optimistic about the future of South Korea's economy. The currency stabilized, the current account was finally in surplus, and inflation had slowed down. (graduate institute) There seemed to be some positive change in South Korean's economy.

Not Fully Recovered

Jul 23, 1999

Daewoo, the 2nd largest conglomerate in South Korea, saw the biggest drop in their stock because they needed new loans to prevent from bankruptcy. (graduate institute) This shows that South Korea was in the process of still making a recovery.

Korea finally improves

Dec 15, 1999

According to graduateinstitute, Koreans were much better off than they were at the beginning of 1999. Inflation was low, private consumption increased 10 percent, and IMF revised the growth of the economy to 9 percent. There was finally some improvement in the life of the South Koreans.

[FAMILY] Some change but not great change

Dec 19, 1999

Around the end of 1999, my family finally got a little better financially after my uncle's business in South Korea got better. We were able to eat out once every couple months and my father stopped going to South Korea for business. I remember he eventually stopped his business and started a new business in the US. This had helped us a little at the point, but there were struggles in our family throughout. My family was finally financially better around 2005.