Part 2/8:
Capital Flight and Current Account Imbalances
Utilizing current account balances serves as a critical lens through which the capital flow dynamics can be understood. In 1994, the current account deficit across five notable Asian countries—South Korea, Indonesia, Malaysia, Thailand, and the Philippines—was around $24 billion. This figure escalated over the following years, peaking in subsequent years before witnessing a historic downturn in 1997.
By 1998, what had once been a significant deficit turned into a surplus, indicating not merely a decline in capital inflows, but a substantial departure of capital from these nations. Such dramatic pivot in capital allocation underscored the systemic vulnerabilities many of these economies faced.