Hungary is on track to overshoot its public deficit target for 2004, the central bank president warned Wednesday, a day after the government said the January-August shortfall was already more than the amount forecast for the entire year.

Analysts said failure to adhere to public deficit targets could endanger Hungary's goal of adopting the euro in 2010 and also shake investor confidence in the new European Union member-state.

The finance ministry, in a monthly report published late Tuesday, said the accumulated deficit from January to August amounted to 5.86 percent of gross domestic product, due to weak revenues.

The government has steadfastly maintained it would reduce the public deficit to 4.6 percent of GDP in 2004.

The central bank has already cast doubt on the government's ability to keep its deficit pledge, with the bank's inflation report in August forecasting a deficit of 5.4 percent of GDP for year-end 2004.

"The central bank sees a danger that the public deficit could be even higher by year-end than the 5.4 percent of GDP that we published in the August inflation report," central bank president Zsigmond Jarai told a hearing of the parliament's budget committee on Wednesday.

Hungary's public deficit reached 5.9 percent of GDP in 2003, which led to the dismissal of former finance minister Csaba Laszlo in January for exceeding the government's target.

Hungary needs to reduce its deficit to 3.0 percent of GDP by 2008 in order to be eligibile to adopt the euro in 2010, which the government has set as its goal.

The EU's Stability and Growth Pact requires eurozone members to rein in their annual public deficits below the 3.0 percent ceiling.

Analysts said the disappointing deficit figures could mean Hungary may have to postpone the adoption of the European common currency.

"The 2010 target date is endangered by the slow pace of deficit reduction," Orsolya Nyeste, an analyst with Erste Bank in Budapest, told AFP.

"The situation is critical in that if the economy does not regain its equilibrium and if the overspending continues, then investor confidence in Hungary could also be shaken," she added.

Erste Bank expects the deficit to come to 5.2 percent of GDP by year-end. JP Morgan, meanwhile, said the deficit could top 5.8 percent of GDP by the end of 2004, MTI news agency reported.

Hungary's Socialist-Liberal government earlier this year said setting the eurozone accession date to 2010 would allow for a gradual reduction of the deficit.

The target date is conservative in comparison to some countries that also joined the EU on May 1, such as Slovenia, which has said it wants to adopt the euro in 2007.

The release of the public deficit data comes at a sensitive time in Hungary, with Prime Minister-elect Ferenc Gyurcsany due to be confirmed in office at the end of September.

The 2005 budget must also be submitted to parliament by September 30.

Gyrucsany, who replaces Peter Medgyessy who was ousted in a coalition row last month, has yet to make public his government programme or his intentions on whether he will keep Finance Minister Tibor Draskovics in his post.

Despite the strong possibility of overshooting the 2004 deficit targets, market analysts widely see Draskovics as a proponent of fiscal responsibility in the government.

Draskovics had previously pledged to further reduce the deficit to 4.1 percent of GDP by year-end 2005, although that goal could change as the government will announce new macroeconomic targets next Wednesday.

The Hungarian currency, the forint, appeared largely unaffected by the deficit data. It stood at 248.47 forint per euro in mid-afternoon trading, marginally weaker than the 248.42 level at closing on Tuesday.

Despite equilibrium concerns, the Hungarian economy has shown strong growth in 2004, with GDP expanding four percent in the second quarter. The stock market has meanwhile been setting historic highs in recent weeks.