New EU member Hungary is expected to postpone joining the euro common currency until 2009 or 2010 due to its disappointing budget deficit last year, the OECD said in a report released Tuesday.

"Postponement of entry into the Economic and Monetary Union to 2009 or 2010 is now envisaged, given a disappointing budget deficit outcome for 2003," the Paris-based Organization for Economic Cooperation and Development said.

It said that early in 2004, "the budget deficit for 2003 was estimated to be just below six per cent" and that Hungary must rein in government spending.

It also said growth slowed in Hungary in 2003, to just below three percent, with both lower wage growth, with public-sector pay hikes coming to an end, and inflation cutting into consumer spending.

But exports should pick up and "strong increases in industrial-output from the second half of 2003" were registered with growth in the first two months of 2004 up nearly 10 per cent (year-on-year).

The OECD said Hungary must work at reducing inflation, which in December 2003 was 5.7 percent.

"Monetary policy must still be active" to reach the target of four percent inflation for December, the OECD said.

"Two small cuts brought the base rate to 12.0 percent by end-April," the OECD said, noting that real short-term interest rates were at nearly five per cent "far above levels observed in other accession countries," which joined the European Union on May 1.