For the CESEE region, data shows significantly smaller capital growth in the post-crisis period (the only exception is Macedonia1). Though the decline/significantly depressed growth in TFP is the key factor for the observed slowdown in potential growth across the region, slower capital accumulation also played a role. Chart 4: Capital, TFP and potential GDP before and after the crisis (average growth rates across countries, in %) 6.0 5.0 4.0 3.0 2.0  1.0 0.0 avg. 2000-08 -1.0  avg. 2009-16  avg. 2000-08  Growth of total capital  CEE  avg. 2009-16  Growth of TFP  SEE  avg. 2000-08  avg. 2009-15  Growth of potential GDP  Baltics  CESEE  Source: World Bank, The Conference Board Total Economy Database and NBRM calculations. Apparently, the region is in need to boost investment growth, catch-up with the pre-crisis level, and narrow some of the existing gaps. As, not only has investment been lower compared to the pre-crisis period, but also some of the international institutions assess their level to be below estimated benchmarks, which are consistent with the features and the development level of the region. For instance, EBRD in its Transition Report (2015-2016)2 provides estimates for the investment shortfalls in some of the countries in the region. The estimates are perceived as conservative, as they do not reveal the needed investment level. They rather reflect the investment level consistent with the one pertinent to comparable countries.
The main role of private equity is to fill the gap between internally generated financing and conventional market sources, such as bank loans and public equity. Unlike most stock market investments, equity investment enables shareholders to adopt a long-term and hands-on approach in their investee companies, fostering sound corporate governance and transparency, making appropriate contributions to business strategy and optimizing management. Crucially, however, it also contributes to the transfer of skills and has positive demonstration effects in terms of the development of local capital markets and competitive market-oriented behavior10. These modalities such 10  EBRD Transition report 2015-2016. 12  as, venture capital, crowdfunding, business angels, are relatively modest in the CESEE, although the same holds for the EU as well, where private equity has a share of around 0.3% in GDP. Debt market in the region is larger compared to the equity, averaging around 50% of GDP, which is still much lower compared to the EU-28 average of close to 160%. Yet, dominant part of this market segment is related to government securities, while the corporate issuance remains modest. In fact, in most CESEE countries, corporate bond markets remain small, or even nonexistent. Chart 14: Stock and debt market capitalization  Source: ECB and central bank websites. To recap, the region needs to mobilize finance, which amidst burdened government financing and structurally difficult access to bank finance for new and innovative companies, requires further development of the capital markets and more diversified portfolio of financial instruments.