Government statistics show that Poland's economy contracted slightly in the first quarter after years of continuous growth, bad news that comes ahead of a possible downgrade by the ratings agency Moody's later in the day.

Poland has been one of Europe's most dynamic economies for years, with an economy on track to grow at around 3.5 percent this year despite the weak first quarter growth. But investor confidence has been shaken by a new government that has weakened the independence of key state institutions and is increasing welfare spending.

Standard & Poor's already downgraded Poland a notch earlier this year, something the government slammed as unfair due to the growth.

The Central Statistical Office said the economy contracted 0.1 percent quarter-on-quarter and that yearly growth was at 3 percent.