Flash estimates of Polish and Hungarian Q1 GDP disappoint

According to the flash estimates, the Polish economy contracted for the fourth consecutive time in Q1 2016. The economic growth was recorded at -0.1% q/q. On a year-on-year basis, the GDP growth rate slowed from 4.3% in Q4 2015 to 3% in Q1 2016. Weak construction sector mainly weighed on the Polish economic growth data, according to the Poland’s statistics office.

Meanwhile, the Hungarian economy also contracted in the first quarter. It shrank 0.8% q/q, whereas on a year-on-year basis, it rose 0.9% in Q1 2016. In the last quarter of 2015, the Hungarian economy had grown 3.2%. If the flash estimates are confirmed, the central banks are likely to further ease monetary policy.

During its earlier two meetings, the Hungarian central bank lowered its interest rates. However, it has signalled that it might pause the rate cutting cycle after lowering the rate once more time. Meanwhile, the Polish central bank has kept its rate on hold for the past year. The National Bank of Poland is expected to lower rates twice in H2 2016 after the new Governor takes over, noted Nordea Bank in a research report.