Financial crisis undermines Asian progress When several Asian banking systems collapsed in 1997 there were fears that poverty and food insecurity would soar in Indonesia, Malaysia, the Philippines, the Republic of Korea and Thailand and that their "tiger economies" would take years to recover. These countries had achieved impressive economic success and succeeded in reducing poverty substantially over two decades. When financial systems collapsed throughout the region, many of these gains were reversed. Businesses closed and large numbers of office and shop workers lost their jobs. The shock waves proved less destructive than first feared, however. By the beginning of 1998, after dramatic falls in their exchange rates and purchasing power, most of the affected countries started to show signs of at least partial recovery. Although poverty and hunger undoubtedly increased somewhat throughout the region, for most countries the crisis was short-lived. Indonesia has been the exception. In just one year, the fourth most populous country in the world saw its currency fall to one-fifth its previous value. The inflation rate soared to 50 percent and food prices rocketed. At the same time, the worst drought in 50 years was followed by excessive rains during the dry season. Bad weather and reduced use of imported fertilizers and pesticides caused a slump in local rice production. Imports increased, but not enough to make up the shortfall. Job losses and inflation hit urban residents particularly hard. A household survey conducted by the World Bank and the Ford Foundation found that urban households spent 34 percent less per person in 1998 than they had in 1997. In rural households, expenditures declined by only 13 percent. In many cases, families that had been poor before the crisis actually benefited from increased business in the informal sector. But the newly unemployed had to sell off assets and deplete their savings in order to cope. As the crisis deepened, many hard-hit families turned to relatives in the countryside for help, particularly in Java. This increased the pressure on those who still had jobs and assets, but now had to feed a growing number of dependants. The impact of the economic collapse on nutritional status showed up quickly. Most households continued to consume normal quantities of rice, but cut back on more expensive foods, such as meat, fish and eggs. Reduced consumption of foods rich in protein and micronutrients led to sharp increases in the numbers of wasted children and anaemic mothers. Current estimates suggest that the proportion of Indonesians who are undernourished almost certainly doubled from 6 percent of the population in 1995/97 to 12 percent in 1999. And the current figure could be as high as 18 percent. This means that the economic crisis has added 10 to 20 million people to the ranks of the undernourished in Indonesia alone. Recovery has begun. But it will take time for Indonesia to create the conditions needed to bring undernourishment back to the levels of before the crisis and continue on the path of progress towards the Summit target. The task has been complicated by events in East Timor, where tens of thousands of people were driven from their homes following the referendum on independence. Humanitarian assistance was mobilized, but if the conflict exacerbates political and economic instability in Indonesia, there is a grave risk that the food security situation could get worse before it gets better. Factors that bring about change War and complex emergencies strain aid resources Floods and drought take toll on lives and crops