(Recasts, updates with analysts, regional data)
By Balazs Koranyi
BUDAPEST, Feb 6 (Reuters) - Hungary's industrial output plunged in December much faster than expected on a broad-based drop in export demand and data from the region indicate that prospects will get worse before getting any better.
Output
"Industrial production data for December was absolutely dismal and again confirmed the tragic collapse of output in the past few months," CIB Bank analyst Gyorgy Barta said.
"The outlook is very bleak, collapsing external demand and the recession expected in Hungary could bring much more pain to the industrial sector down the road," Barta said.
The downturn may be comparable to the collapse of Hungary's industry at the end of communism in 1989 when the country began a painful shift to a market economy.
"Even during the change of regime (from communism in 1989) we probably didn't have a decline so big," KSH statistician Miklos Schindele said. "Back then, various parts of industry fell apart one by one. Now it's happening all at once."
Based on working day adjusted data, output in December was down by 23.3 percent year-on-year while in month-on-month terms, seasonally and working-day adjusted figures showed a 14.6 percent drop.
The forint firmed on Friday morning but dealers said this was driven by regional movements and that the output data had no palpable impact.
OUTLOOK BLEAK
German industrial orders data released on Thursday indicate there is little relief ahead for Central Europe's economies, which rely heavily on German markets.
German industry orders fell by 27.7 percent in December compared to a year earlier and produced their biggest annual decline since reunification, as demand for manufactured goods fell away sharply for the fourth month in a row.
"This means that the first signs of hope for a reduction in the pace of descent by the German economy, visible in the sentiment indicators, are nowhere to be seen ... (and) a clear decline is also to be anticipated for the start of the new year (2009)," Commerzbank said in a note.
Hungary's government recently revised its GDP forecasts and now expects the economy to shrink by up to 3 percent in 2009 after earlier projecting a 1 percent decline but some analysts said that in the light of fresh output data, this may still be too optimistic.
"We will most probably mark down our growth expectations, industrial production may drop by around 15 percent instead of 8 percent in 2009, our former forecast, which in itself would reduce growth by 1.5 percent or so," MKB analyst Zsolt Kondrat said.
"This implies a deeper recession, a close to 5 percent fall in output is perfectly possible," Kondrat added.
Most central European countries will release fourth quarter GDP data next week.
Central Europe's purchasing manager's index data released earlier this month also indicate rapid contraction throughout the region.
The Czech Republic's PMI fell for the seventh consecutive month below the critical 50-point mark to a record low 31.5 in January while Poland's PMI rose slightly to 40.3 in January from 38.3 in December but remained well below 50.
(Reporting by Balazs Koranyi; editing by Stephen Nisbet)