There are many ways that a country can utilize to help encourage economic growth. A country can undertake various strategies, be it private or public in nature. The government can undertake pro-active economic growth initiatives for the betterment of the country. Private sector lenders can also help encourage economic growth through various ways. In short, a country can adopt various policies and use them to stimulate economic activity and thereby drive growth.
A country's public policies can have a direct impact on economic activity. These policies can help create conducive conditions for private sector lenders to lend to a country. For instance, it is not easy to secure a loan when a country is at a fledgling economic phase. The policy may require the government to promote projects aimed at improving the country's infrastructural setup. Another approach that a lender may take is to look at the borrower's potential profit margins. Factors like potential income from rent, purchases of fixed assets, and even future oil revenues may be considering to help determine the suitability of a borrower for a loan.
Private lending may be easier to encourage as the impact of a lending decision is less direct. However, if a country's current economy needs to grow faster, the impact of such actions will have to be tempered by the slowdown in public spending. A country's finance, banking, and insurance sectors can also influence a country's economic outlook.
Private lending can provide a country with more financing options than its public sector counterparts. The borrower has the freedom to choose from a variety of lending products like secured loans, commercial loans, bridge loans, commercial real estate loans, and non-recourse commercial loans. Since the interest rates are higher in private lending than in public ones, the need to secure a significant amount of collateral is also a factor.
There are a few things a country can do to help encourage economic growth. One of these is to undertake pro-forma budgeting, which is when the government creates and implements a new budget. Doing so will not just give the government a chance to reassess the state of its finances, but will also give it an opportunity to revise and update its policies in areas where growth is desirable, and make adjustments where necessary.
Another thing a country can do to help encourage economic growth is to implement policies that it needs to encourage business activity. For example, a country that has a low capacity for investment may need to attract investment capital, which may drive up property prices, allowing the government to increase tax revenues. This could lead to higher government spending, or increase public infrastructure investment. In short, any action that changes the way that a country spends and earns money will have the effect of encouraging economic growth. Economic stimulus packages are popular options that governments often take, although this option does depend on the overall strength of a country's economy.