ABSTRACT

A vast body of literature is now available on the post mortem of the financial crisis that hit East Asian economies during 1997-1998.1 The economic slump caused by the crisis has caused widespread social distress in the worst-affected countries, Thailand, Indonesia and the Philippines, and even the least affected countries, such as Singapore, also experienced a reduction in the government expenditure on various social sectors. A fall in output and incomes was invariably accompanied by massive job losses, due to bankruptcies and cutbacks in the production sectors. This led to a sharp rise in unemployment, fuelled by the rise in inflation which exerted a further toll on real wages and incomes. The combined effect increased the incidence and severity of absolute poverty and worsened the distribution of income.