Elsevier

Health Policy

Volume 75, Issue 3, February 2006, Pages 347-357
Health Policy

Economic stability and health status: Evidence from East Asia before and after the 1990s economic crisis

https://doi.org/10.1016/j.healthpol.2005.04.002Get rights and content

Abstract

The East Asian economies of Indonesia, Malaysia and Thailand suffered declines in their economic growth rates in 1997. The Indonesian and Thai government followed the World Bank prescription for adjustment, which included a cut-back in government spending at a time when there were significant job losses. Malaysia chose its own path to adjustment. Evidence presented in this paper shows that although the declines were short-lived that there was an impact on the health status measured by mortality rates for the populations of Indonesia and Thailand. There was little apparent impact on the health status of Malaysians. The lessons for other developing economies include the importance of social safety nets and the maintenance of government expenditure in minimising the impact of economic shocks on health.

Introduction

The East Asian economies of Indonesia, Thailand and Malaysia suffered declines in their growth rates in the late 1990s. The Asian financial crisis occurred as the currencies of one country then another depreciated against the US dollar. The decline in the currencies and the lack of confidence in the economies lead to a capital outflow, bankruptcy and unemployment. The crisis quickly became an economic crisis as it impacted on all sectors of the economies. The period was in stark contrast to that of the early 1990s and prior when the economies’ growth rates soared and they generally prospered.

The objective of this paper is to examine the impact that changes in real GDP per capita had on health status in Indonesia, Thailand and Malaysia after the economic crisis of the 1990s. We examine that impact by exploring a number of dimensions of the relationship between health and income. These dimensions include health status indicators as well as household income and government expenditure. The question of interest in this paper is what impact did the declines in growth rates in the late 1990s have on the health status trends.

The relationship between health status and economic stability is an important one especially in developing economies. Many of these economies are subject to fluctuations in living standards to a much greater degree than that experienced by industrialised economies. Moreover, in developing economies, a larger segment of the population is poor and therefore already at risk of health effects associated with poverty. Economic crises exacerbate the health problems of the poor.

Section snippets

Background

The relationship between income and health status is a complex and reciprocal one [1], [2], [3]. Both developing and developed economies experience a positive relationship between income and health. The World Bank noted that beyond a critical threshold level of per capita income, estimated as $ 11,000 in 1990 US dollars, gains in health due to increases in income diminish towards zero [4]. The relationship tends to be strong, however in developing economies with low levels of per capita income.

A

The economic crisis in Indonesia, Malaysia and Thailand

The economies of Indonesia, Malaysia and Thailand suffered a fall in their growth rates, increases in unemployment and a fall in living standards as a result of the economic crisis of the 1990s. The governments, assisted in Indonesia and Thailand by the IMF, responded differently to the crisis, and the rates of improvement in economic indicators were considerably different between the economies. Because the response to the crisis differed between the three economies, we provide below a short

Economic crises and health status indicators

Indonesia, Malaysia and Thailand are still developing but have improved their position on the world league tables for GDP per capita considerably during the 1980s and 1990s. The remarkable growth in GDP per capita (refer to Fig. 2, Fig. 3, Fig. 4) before the economic crisis was associated with considerable health gains. The strong link between income and health variables was outlined earlier in the paper. As the economies grew, real income improved as the unemployment or underemployment rates

Discussion

The economic crisis affected Indonesia more than the other East Asian economies due to the political and social unrest which accompanied the crisis. The Indonesian real GDP per capita growth rate has only recently regained its pre-crisis level (Fig. 2). There is considerable evidence of the deleterious impact of the crisis at a micro level but the national health indicators do not reflect this trend. The reasons proposed here for an absence of reversal in the health indicators is that Indonesia

Acknowledgements

I would like to thank Vasanthi Peter, Maria Mangano and Han Hwee Chong for research assistance and the Australian Research Council for financial support. This paper was presented to the annual workshop of the Department of Economics, Curtin University and I would like to thank my colleagues for their input. I would also like to thank a referee for constructive and insightful comments on the paper.

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