The Impact of the Asian Crisis in Malaysia When the Asian financial crisis hit Malaysia, the impact was traumatic. The stock, currency and real estate markets nearly collapsed. The crisis in Malaysia initially started with the performance of the Malaysian currency. Following the hasty withdrawal of money from Malaysia, the value of the Malaysian Ringgit began to fluctuate wildly. In July 1997, a few days after the devaluation of the Thai baht, the Malaysian ringgit was "attacked" by speculators. The overnight rate went from less than 8% to more than 40%. This led to rating downgrades and a general sell-off in stock and currency markets. From a value of 2.52 to a US dollar in June 1997, it fell to 3.2 to a US dollar in September 1997, just three months after the crisis broke out. It reached a new low of 4.5 Ringgit per US dollar in January 1998 (Tourres.2003,78,193). This severely exacerbated the decline of the Malaysian stock market, which had already been on a downward trend before the crisis, as the depreciation of the Ringgit led to panic selling by foreign investors. The huge drop in the Ringgit and the stock market had a devastating impact on highly indebted businesses, especially those companies that had obtained loans from abroad. The sharp decline in the stock market and the specter of many of these highly indebted companies unable even to service interest on loans then created pressure on bank liquidity. This liquidity crisis resulted in a general loss of confidence in the Malaysian economy and ultimately accelerated a massive contraction of the Malaysian economy from growth of 7.3% in 1997 to a low of -7.4% in 1998. The per capita income fell by RM9.1 billion. to RM8.2 billion over the same period, while the overseas economy and financial sector were disastrous, as well as the timely and prudent measures introduced by the Malaysian government during the crisis. Growth then stabilized at a slower but more sustainable pace. The massive current account deficit turned into a rather large surplus. Banks were better capitalized and non-performing loans were realized in an orderly manner. Small banks were taken over by strong ones. A large number of PLCs have been unable to regulate their financial affairs and have been delisted. Compared to the 1997 current account, Malaysia was estimated to have a surplus of US$14.06 billion in 2005. Asset values, however, have not returned to pre-crisis peak levels. In 2005 the last anti-crisis measures were removed with the removal of the ringgit from the fixed exchange rate system. But unlike the pre-crisis days, it did not appear to be a free float, but a managed float, like the Singapore dollar..