* Czech 2010 budget gap seen 4.6 pct/GDP, similar to 2009
* Assumes economy recovering with 0.8 pct growth next year
* Czech March industrial output -17.5 pct, worse than fcast
(Adds industry)
By Jason Hovet
PRAGUE, April 30 (Reuters) - Czech industrial production fell by double digits for the fifth straight month in March, data showed on Thursday, and officials hiked the 2010 public deficit forecast by half to reflect tumbling tax revenues.
The 17.5 percent drop in industrial output was the latest signal that economic crisis is ploughing unabated through the European Union's eastern wing, clobbering producers and undercutting government plans to cut fiscal gaps to under 3 percent, a requirement for euro adoption.
The Finance Ministry forecast next year's public sector shortfall at 4.6 percent of gross domestic product, eclipsing a forecast of 2.9 percent made in January.
The flash estimate of industrial output undershot forecasts from analysts who had expected a used-car scrap subsidy in Germany to help Czech car factories.
Hungary and Poland have also reported double-digit falls in output, while carmaker Skoda, the biggest Czech firm, said on Wednesday that physical production had fallen 45 percent in the first quarter.
Analysts said the data supported a rate cut at the Czech central bank's meeting next week.
"Five consecutive months of double-digit falls of industrial output are a strong argument for the central bank to relax monetary conditions again after a brief pause caused by crown volatility," said David Marek, chief economist at Patria Finance.
On Wednesday, the ministry forecast the export-dependent Czech economy would grow 0.8 percent in 2010, rebounding from a contraction of 2.3 percent this year.
The Czech crown shrugged off the news but edged down slightly along with the Polish zloty and Hungarian forint. They have both rallied 6.7 percent against the euro since March 30, largely due to a surge in investor appetite for emerging market assets.
HIGHER DEFICITS
Falling western demand for central Europe's cars, televisions and other goods has pushed the region's economies into or near recession, straining government coffers.
The Czech Finance Ministry expects the 2009 budget gap to rise to 4.5 percent of GDP using the EU measure, three times 2008's level.
Poland, whose economy is seen eking out some growth this year, surprised last week with a larger-than-expected 2008 budget deficit of 3.9 percent of GDP. It said this year's gap could widen.
In Hungary, which got a $25 billion International Monetary Fund lifeline in October, the government wants to keep the deficit below 3 percent of GDP despite expectations that its economy will contract by 6 percent this year.
Incoming Czech Finance Minister Tomas Uvira said on Wednesday the central budget gap, which makes up the majority of the public sector budget, may reach 200 billion crowns this year, more than the 150 billion forecast by outgoing Finance Minister Miroslav Kalousek. (Reporting by Jason Hovet; editing by Toby Chopra/Ruth Pitchford)