Poland's Capital Market Needs Overhaul to Sustain Economic Growth

Poland's capital market is significantly underdeveloped, with its capitalization at just 27-28% of GDP, far below the EU average of 63% and even lower than countries like Germany or Spain, which have similar bank-centric financing models. This shallow market poses a future barrier to economic growth, which has historically relied on a well-educated workforce and foreign direct investment.

Professor Łukasz Hardt, an advisor to the head of the Polish Financial Supervision Authority, attributes this to the financial system's structure, where banks dominate and are heavily invested in government bonds, holding the highest percentage of state assets in the EU. Compounding this is the structure of household savings, with about 75% allocated to real estate or bank deposits, driven by cultural factors and tax preferences that favor property ownership over capital market investments.

Zbigniew Jagiełło, former CEO of PKO BP, argued that reforms are best undertaken during periods of economic strength, likening the current situation to the post-1989 reforms. He warned that delaying action could lead to market pressure as public debt rises, potentially resulting in higher borrowing costs or reduced access to credit.

Maciej Trybuchowski, CEO of KDPW and KDPW_CCP, added that the prevalence of small and medium-sized enterprises in Poland's economy also impacts the stock exchange. He noted that large, mature companies attract foreign investors, who constitute 70% of traders on the Polish stock market and drive most of its turnover. The limited supply of large-cap companies hinders foreign investment, despite the high turnover generated by existing foreign participation.