Exploring the Determinants of Economic Growth, Highlighting the Impact of Natural Resources: An Empirical Study of European Union Countries

Contemporary economies face increasingly complex economic challenges, and fiscal policies are the fundamental instrument through which governments seek to ensure sustainable economic growth and social welfare. The economic paradox encountered in the literature review highlights that natural resource wealth can affect the economic growth of countries whose incomes depend on the exploitation of these “gifts” offered by nature. This study analyzes the determinants of economic growth, with a focus on the impact of natural resources, for all 27 countries in the European Union over a 20-year period, respectively 2005-2024. The annual data included in the sample were extracted from the World Bank website, and the empirical analysis of the panel data was conducted using the least squares method. The dependent variable is represented by the economic growth rate of the Gross Domestic Product, while the independent variables include fiscal policy indicators, macroeconomic indicators, and public governance indicators. The main findings of the study show that taxes on goods and services, total natural resource rents, foreign direct investment, inflation, trade, regulatory quality, and rule of law have a positive impact on economic growth. Moreover, the results demonstrate a negative influence of social contributions on economic growth. The findings of this research highlight the moderating role of governance in the relationship between the fiscal system, natural resource rents, and economic growth.