VietNamNet Bridge – Economists have warned that many problems may arise if VND700 trillion is pumped into the national economy to raise the credit growth rate to 22 percent and obtain 6.7 percent GDP growth rate this year.
Bui Quang Tin, a lecturer at HCM City Banking University, said the increase in money supply will have an impact on GDP, inflation, interest rate and exchange rate.
He pointed out several concerns. First, the economy will need time to absorb the money. If injecting money into production, capital turnover would take 3-6 months on average.
Second, when the money supply increases, people may pour capital into non-production fields such as real estate and securities, fields called ‘instant noodles’ because return on investment capital can be done relatively quickly.
Banks have been asked to restrict lending to these sectors. If banks pour too much money into real estate, the real estate bubble in 2006-2008 will come back.
|Banks have been asked to restrict lending to these sectors. If banks pour too much money into real estate, the real estate bubble in 2006-2008 will come back.
If money is disbursed for real estate and securities, the bad debt ratio will increase.
Tin said that IMF and WB had warned about the high credit growth this year which may bring new risks to the banking system.
“The high credit growth may help obtain targeted GDP growth rate, but it will also cause negative impact, which may be even higher than benefits. These are risks in inflation, exchange rate, interest rate, production cost and bad debt.” Continue reading “Vietnam’s plans to pump more money into economy risky: economists”