(Adds detail, analysts)
BUDAPEST, Feb 13 (Reuters) - Hungary entered recession in the fourth quarter of last year when the economy contracted 1.0 percent from the third quarter, causing a year-on-year fall of 2.0 percent, the Central Statistics Office (KSH) said on Friday.
These are the worst figures since 1996 when the country first published quarterly gross domestic product data. The preliminary annual decline in the fourth quarter was bigger than analysts' median forecast of a 1.3 percent fall in a Reuters poll earlier this week.
Separate data also released on Friday showed that annual consumer price inflation slowed to 3.1 percent in January from 3.5 percent in December. The figure, Hungary's lowest inflation rate since July 2006 when it was 3.0 percent, was below analysts' median forecast of a 3.3 percent rise.
Falling demand in western Europe due to the global crisis has hit the export-led economies in the European Union's eastern members. This has caused a slump in exports and industrial output, and triggered interest rate cuts and a drop in the forint currency.
"The GDP numbers are not a major surprise, but it nonetheless confirms to us that Hungary is in recession and things are likely to get even worse from here on. GDP could drop by more than 5 percent year-on-year in 2009," said Lars Christensen at Danske Bank.
In the third quarter Hungarian GDP contracted 0.5 percent from the previous quarter, revised from a 0.1 percent fall reported previously, although in annual terms it rose 0.8 percent.
The Hungarian government now projects the economy will contract by up to 3 percent this year, much faster than its last forecast for a 1 percent fall. It is redrawing its economic plans and revising the budget to compensate for a shortfall in revenues.
"No details are available yet, but the collapse of the export markets ... and the financial crises weighed on the industry and on the financial services sector," said Mariann Trippon, analyst at CIB Bank in Budapest.
German GDP shrank by a bigger-than-expected 2.1 percent quarter-on-quarter, its worst quarterly performance since reunification in 1990, preliminary data showed on Friday.
In the whole of 2008 the Hungarian economy, which has lagged most other countries in central Europe in the past few years, posted 0.6 percent growth. This was below 1.1 percent in 2007 and 4.1 percent in 2006.
(Reporting by Sandor Peto and Gergely Szakacs; editing by David Stamp)