Poland and Hungary were faced with the decline of the economy for the first time since 2012

Poland’s economy shrank in the first quarter for the first time since 2012, according to Financial Times, citing published data. The volume of Polish GDP declined compared to the previous quarter by 0.1%, while economists had expected growth of 0.6%. In the last quarter the economy grew by 1.3%.

In annual terms, Polish economy grew by 3%, also below expectations, the newspaper notes. Economists had forecast an increase of 3.5%, and in the last quarter of 2015 the growth amounted to 4.5%.

After the close of markets, Moody’s intends to review the credit rating of Poland. According to the FT, most analysts expect it to either downgrade, or CreditWatch with negative implications.

Hungary on Friday morning also released data showing the first contraction in GDP since the end of 2012. In comparison with previous quarter it decreased by 0.8%, consensus +0,4%. In the last quarter, growth was 0.6%.

Compared to last year, the Hungarian economy grew by 0.9%, below the 3.2 percent recorded in the previous quarter, and again below forecasts that had predicted an increase of 2.4%.

The decline, points out the FT, in part due to a significant decline in construction, which at the end of March were down 33.9%. In this section “civil engineering”, a decline of 52.4%.

Poland is the only EU country that avoided recession after the global financial crisis of 2008-2009 and has since shown impressive growth results. Real GDP growth, however, was probably overestimated as underestimated the inflationary component, the FT wrote at the beginning of may, citing a chief economist for emerging markets at London consultancy Capital Economics William Jackson.

This specialist argued that the sustained deflation in Poland when comparing with data from other Central European countries was achieved by the peculiarities of statistical accounting, and not a lack of pressure on domestic prices. In the end, says the FT, deflation in Poland ceased in mid-2014, despite the official statistics, and the Central Bank there is no need to cut the interest rate in the next six to nine months.

With regard to Hungary, in mid-April, Reuters reported that the draft budget for 2017 envisages a deficit of 2.4% of GDP. It will be higher than the 2% expected in the current year, but is within the limit of 3% of GDP limit for EU members.

In April of last year, the budget deficit for 2017 were projected at 1.7% of GDP. However, according to the head of the administration of Prime Minister of Hungary Janos Lazar, the next year the government planned tax cuts and subsidies for new housing that will attract increase the deficit.

Reuters recalls that in 2018, Prime Minister Viktor Orban awaiting elections, and in February, the surveys showed a decline in his popularity after its stable growth amid austerity measures taken by the authorities, by the decision of the immigration crisis. Hungary did not allow the refugees to travel through its territory to Austria, building a fence on the border with Serbia and periodically closing its border with Croatia.