Hungary probably exited its recession in the second quarter, the longest since the 2008 global financial crisis, despite the war in Ukraine continuing to impact growth.

Hungary’s economy grew 0.2% between April and June compared to the first quarter, as per a Bloomberg survey of economists, the first such growth since Q2 2022. Yet the economy contracted 1.4% on an annual basis.

Elsewhere, in Poland, the economy likely fell 2.3% in Q2 compared to the first three months of the year, the third non-consecutive contraction since 2022, Bloomberg reports. 

The Polish economy shrank 0.3% on an annual basis, according to the findings from an additional survey, in the face of the fastest price growth in 25 years.

The effect of Russia’s invasion of Ukraine has resulted in inflation hitting double digits in the worst cost of living crisis in decades, leading central banks to take action by hiking interest rates.

This has resulted in a reduction in spending from consumers and businesses, impacting economic growth across the European Union’s eastern wing.

The impact of inflation and tighter monetary policy should have started to ease at the end of Q2, according to Oxford Economics senior economist Tomas Dvorak, even though weak demand in the euro area is hindering demand for exports.

“As inflation eases and central banks increasingly look toward normalising policy, domestic demand should see some pick-up. But we think this will be very gradual, not reaching any significant speed before the end of the year,” Dvorak stated.

The issue of the cost-of-living crisis in Poland’s $690 billion economy is a key point of debate in the lead-up to the country’s election on 15th October. Up to now, the ruling Law & Justice party is heading up opinion polls but appears on track to fall short of a majority.

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