Evaluating the Impact of Institutional Investors on Economic Growth in South-East European Transition Economies

This study examines the impact of institutional investors—pension funds, insurance companies, and mutual funds—on economic growth in South-East European (SEE) transition economies (Albania, North Macedonia, Serbia, Croatia, Slovenia, Romania, Greece, and Bulgaria) from 2012 to 2020. Using panel regression analysis, we assess their relationship with GDP per capita growth while controlling for key macroeconomic and financial factors. The results show that institutional investors do not significantly contribute to economic growth in most SEE economies, except in more financially integrated markets like Croatia and Slovenia. This limited effect likely reflects their small market presence and underdeveloped domestic capital markets. Notably, Gross Fixed Capital Formation exhibits a negative correlation with growth, pointing to inefficiencies in investment allocation, whereas trade in services consistently supports economic expansion. These findings emphasize the need for structural reforms—including capital market deepening, improved corporate governance, and greater institutional investor engagement—to enhance their role in fostering sustainable growth across the region.