Europe should be “realistic,” devalue its currency and bear the pain of reforms so that it can emerge from the debt crisis stronger like Asia did in 1997, said Bank of Thailand’s Governor Prasarn Trairatvorakul.
“At that time after ‘97, we were realistic,” Prasarn told CNBC. “[In] Thailand, we changed the exchange rate regime, reoriented the macro policy, let the currency into a more flexible movement; we depreciated the currency. We went into a number of reforms in the banking sector, corporate governance so on coming into play.”
The Southeast Asian nation, which triggered the start of the Asian financial crisis in July 1997, had to abandon its currency’s peg to the U.S. dollar after it could no longer afford to keep it at 25 baht to the greenback. The bahtlost more than half its value in less than 6 months, dropping to 56 baht by January 2008, and Thailand had to reform its banking sector in exchange for nearly $21 billion in aid from the International Monetary Fund .
After shrinking 10.5 percent in 1998, Thailand's economy bounced back in 1999 and has been growing at an average rate of 4 percent annually from 2000-2009. The Thai currency currently trades at around 32 baht against the dollar.
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