The new head of the Warsaw Stock Exchange is confident his exchange can recover from a lost decade in which it failed to keep pace with Poland’s booming economy.

Last year, the total capitalization of companies listed in Warsaw fell to 22 percent of Polish GDP, compared to 35 percent in 2013. This is due to a decline in new IPOs – Polish parcel delivery company InPost opted for an IPO in Amsterdam in 2021, raising €2.8 billion – and declining trading volumes across Europe.

During the same period, Poland’s economy outperformed that of its major European partners, most recently with stronger-than-expected GDP growth of 3.2 percent in the second quarter compared to the previous year.

The stock exchange’s declining importance among investors and companies is a significant drop from a decade ago, when the exchange seemed poised to dominate Central and Eastern Europe and was in merger talks with its longer-established Vienna counterpart.

“Unfortunately, our stock market has not really kept pace with the growth of our economy,” said Tomasz Bardziłowski, CEO of the Warsaw Stock Exchange, in an interview.

Bardziłowski was appointed by Prime Minister Donald Tusk’s coalition government in February to revive the Warsaw Stock Exchange, two months after Tusk ousted the right-wing Law and Justice (PiS) party from government.

Bardziłowski sees reason for optimism, such as the fact that Tusk will replace the leadership of state-controlled companies listed on the Warsaw Stock Exchange. This includes in particular the oil and gas company Orlen, whose share price has fallen by 30 percent in the past five years.

In February, Orlen was accused in a state audit commission of selling assets for $1.24 billion below value to complete a domestic merger that strengthened Orlen’s position as Poland’s leading energy company. Last year, one of the most prominent foreign investors, the Norwegian sovereign wealth fund, warned that Orlen’s purchase of a Polish media company could have “impact on press freedom” in Poland, as it was seen as a move commissioned by the PiS government.

Without specifically addressing Orlen, Bardziłowski said that “foreign investors showed less interest in our stock market and lost some confidence, in particular due to concerns related to corporate governance in some state-owned companies.”

Bardziłowski said he was also encouraged by recent media reports that Croatian grocer Studenac was considering a dual listing in Warsaw and Zagreb, while private equity firm CVC is expected to list its Polish retailer Żabka in Warsaw. With its convenience stores valued at $8 billion, Jabka would be one of the biggest IPOs in Europe this year.

“Once there are a few important IPOs, there will be momentum and I think there will be more queues after that,” said Bardziłowski.

However, the number of delistings in Warsaw has recently exceeded new listings, partly reflecting the growing influence of private equity firms. In July, while preparations were underway for Żabka’s IPO, CVC separately offered to buy Comarch and delist it. The deal with the family of owners of Comarch’s founders was completed, valuing one of Poland’s largest software companies at $650 million.

Some of the stock market’s problems were not its own fault. These include, for example, an outflow of money following a Polish pension reform – dating back to 2013 under the previous Tusk government – that forced pension funds to reduce their equity investments.

But some company owners who took their companies public in the 1990s after the collapse of the communist regime in Poland are also scathing about the latest regulation.

Krzysztof Borusowski, president of the debt collection company Best, which went public in 1997, accuses regulators of discouraging companies from listing by creating additional bureaucratic hurdles instead of encouraging investors by better regulating problems such as insider trading.

“We have completely lost our momentum,” he said. “Our market is now over-regulated, but with a focus on the unimportant things.”

To resolve the situation, “a serious debate about the purpose of the Warsaw Stock Exchange is really needed,” he added.

During the debate, Bardziłowski called for “more tax incentives,” including a reduction in capital gains tax for long-term investments.

He promised to launch a long-awaited electronic trading platform before the end of 2025, a year behind schedule. Bardziłowski also hopes that Warsaw will start listing real estate investment funds next year.

“We lost several years in Poland without a clear strategy on how to attract our own companies and without anything that could make foreign capital want to invest here,” said Jarosław Grzywiński, who briefly served as CEO of the Warsaw Stock Exchange in 2017. “If you had a good company with a scalable business, it was normal to look abroad for a more liquid market, as InPost did with its IPO.”

Although some observers remain skeptical about a quick recovery in Warsaw, most welcome Tusk’s appointment of a CEO who previously worked in the equity sector rather than in public administration. Bardziłowski started as a stock market analyst and then headed various brokerage firms.

“You can’t behave as if you were part of the state administration, just sitting there and waiting for customers. You have to be proactive, which has not been properly understood not only in the last eight years (of the PiS government), but for a long time,” said Jerzy Kwieciński, who was finance minister under PiS. “I have hope, because this Tomasz comes from the capital markets and understands that.”

Eva Sudol, who teaches finance at Harvard Business School, said Warsaw faces a very difficult challenge to get out of the chicken-and-egg situation of the last decade: “If there is not enough capital flowing in, valuations are low and consequently no new companies want to enter.”

The Warsaw Stock Exchange needs better marketing, better regulations and possibly tax incentives to attract investors. Ironically, however, such an improvement could also make Warsaw a takeover target, Sudol said. “I think Euronext would like to buy the Warsaw Stock Exchange in the end.”