CAPITAL ACCUMULATION AND ECONOMIC DEVELOPMENT

Abstract

Capital formation is the basis of economic development, because without the necessary invest- ment of resources it is impossible to imagine the socio economic development of the country. The prob- lem of the countries in transition is the lack of domestic resources for capital formation since most devel- oping countries can be characterized by illiquidity of their own economies and high debt.

The financing of economic development can be provided from internal and external sources of capital, while domestic sources should be the dominant form of financing the economy. Level of indeb- tedness of the domestic economy is so high that any additional borrowing is a danger to the national economy.

The aim of the paper is to analyze the national savings as the best and the most efficient form of capital accumulation in the domestic market. The structure of savings and the problems in forming and finding the funds from internal sources will be explained through the examples and data relevant to the structure and volume of public and private domestic savings as the main factors of national savings.