How does the economy grow when it is injected with large amounts of capital?

Accelerate investment, quickly inject capital into infrastructure, economy ...

On August 19, nationwide, 250 projects and works with a total investment of about 1.28 million billion VND were simultaneously inaugurated and construction started. Of these, 129 projects used state capital, with 478,000 billion VND, accounting for 37% of the total investment; 121 projects were invested from other sources, with 802,000 billion VND, accounting for 63% of the total investment.

Mr. Le Anh Tuan - Deputy Minister of Construction - said that 250 projects inaugurated and started on this occasion will contribute over 18% of the gross domestic product (GDP) this year and over 20% of GDP in the following years.

"Projects using state budget capital will create a strategic infrastructure framework, thereby leading and attracting private investment," Deputy Minister Le Anh Tuan emphasized.

In addition to public investment capital, there are also projects using private sector investment capital, including foreign direct investment (FDI) projects.

For example, among these hundreds of projects, there are 5 FDI projects, with a total investment capital of 54,000 billion VND. All of this is showing the great effort of the Government in mobilizing social resources for investment, production and business, especially in the construction of strategic infrastructure projects.

According to the Ministry of Finance's calculations, this year, to achieve the growth target of 8.3 - 8.5%, total social investment capital must increase by 11 - 12% compared to the previous year; in which, the mobilization and implementation of total social investment capital in the last 6 months of the year must reach about 2.8 million billion VND.

According to the State Bank's calculations, to achieve the high growth target as set, credit will have to increase by 16% this year with about 2.5 million billion VND pumped into the economy. Recently, the bank announced a credit package of 500,000 billion VND from capital sources of 21 banks for science, technology, innovation, digital transformation and strategic infrastructure (transportation, electricity, digital infrastructure...).

Capital flows strongly into transport infrastructure.

In fact, many banks have provided loans for science, technology, innovation, digital transformation and strategic infrastructure projects such as Long Thanh airport, Nhon Trach 3 and 4 power plants, or Lao Cai - Vinh Yen power transmission line; BOT projects, power production and transmission. Most recently, this bank has participated in financing part of the 500KV power line project...

Mr. Hoang Minh Ngoc - Deputy General Director of Agribank - said: "Having assets or credit is just one of the conditions; banks normally lend based on the customer's trust in the bank. For example, with this 500 trillion VND package, businesses only need to prove that they meet the conditions to be granted a loan.

Beware of inflation risk

To serve the growth target of 8.5% this year while still ensuring inflation control, macroeconomic stability and major economic balances, monetary policy plays a very important role.

The banking sector must increase capital supply to the economy. This also forces regulators to face the problem of how to control capital flows into priority sectors and how to prevent banks from “racing” input interest rates when credit demand increases sharply.

Since the beginning of the year, the basic mobilization interest rate has been stable, loan interest rates have even decreased by 0.4%/year compared to the end of last year, and inflation is still under control.

However, inflationary pressures are rising, so increasing money supply will only increase this pressure. Not to mention that the exchange rate is also under pressure due to the dual impact of economic factors and market psychology.

Speaking to Tien Phong reporter, economic expert Ngo Tri Long affirmed that “pumping” capital into the economy is to promote economic development. This capital flow focuses on infrastructure projects to stimulate economic growth and create positive spillover effects.

However, Mr. Long noted that the initial success in controlling inflation in the first 6 months of the year was the result of effective coordination between monetary, fiscal, trade and price management policies. However, the road ahead still has many uncertainties, so to maintain the CPI target for the whole year within the range of 4 - 4.5% requires consistent and flexible management, while enhancing forecasting capacity and proactive policy response.

Specifically, the State Bank needs to continue to maintain a stable base interest rate, credit growth should be focused and should revolve around the target of 16%, credit flow should focus on export and production - essential sectors for GDP growth, avoiding widespread price fever.

Fiscal policy needs to provide controlled support, especially not to adjust taxes and fees significantly to limit cost pressure on end consumers. Public investment cash flow (36% disbursed as of the end of June) needs to be directed towards infrastructure and internal capacity, increasing medium-term supply, not suddenly creating short-term demand pressure...