The Asian financial crisis started in 1997 in Thailand and then spread to other countries through the economic contagion. This crisis impacted not only Thailand but also Indonesia and South Korea. The economies of Hong Kong, Laos, the Philippines, and Malaysia also suffered. In China, Taiwan, Singapore, Brunei, and Vietnam economies were not damaged as much, but they slowed down significantly. The crisis in the United States, also known as the global financial crisis happened in 2007. It created the high risk of the total collapse of the biggest financial institutions, which was avoided, yet there was still a noticeable downfall of stock markets all over the world. The Asian crisis was regional, while the American one affected the strength of the dollar and impacted the whole world.
The United Arab Emirates was less affected by the crisis than the countries of Europe or America. The reason for this is that UAE’s banks are less integrated into the global financial markets. The spheres that suffered the most were banking, real estate, and foreign direct investment. The crisis reached UAE through the contraction in global economic activity, plunging asset prices, the downfall of prices for oil, and financial deleveraging. Besides, the crisis created rapid domestic credit growth in UAE. Even though the financial institutions of the Emirates immediately started to address the negative impacts, the country was not immune to the global problem.
To recover from the negative impacts created by the financial crisis, the United Arab Emirates introduces exceptional financial measures such as capital and liquidity injections. The UAE maintained increased spending notwithstanding the significant downfall of prices for oil caused by the dropping demand. This created a strong positive stimulus for the country’s economy. Despite the fiscal deficit, the recovery policies were aimed at maintained expenditure. This was risky, yet helpful.