Further improvement of general government balance in August

Latest MoF data show that general government deficit, according to cash data, eased by 43.2% y-o-y to €9,889m in 8M’12 from €17,409m last year, with primary balance recording a surplus of €1,440m from deficit of €4,161m in 8M’11. Current period data incorporate:

  • A drop of state budget deficit by 35.9% y-o-y to €11,458m with primary deficit shrinking to just €388m from €6,190m in 8M’11.
  • Extrabudgetary funds’ (i.e. legal entities) surplus of €613m from €686m last year.
  • Local governments’ surplus of €313m down from last year’s €1,046m.
  • Social security funds’ and hospitals’ surplus of €642m from deficit of €202m in 8M’11.

Released data imply a material improvement of general government balance, which recorded a surplus of €720m in August from deficit of €729m in July and €1,697m in June. What is more important is that August primary balance recorded a surplus (for second consecutive month) of €1,669m from €261m in July and deficit of €1,045m in June. August bottom-line mainly reflects a positive contribution from state budget (€731m) and extrabudgetary funds (€86m), while local governments recorded a primary deficit of €85m.

It is reminded that general government deficit (ESA95) stood at €19,586m or 9.1% of GDP in 2011 and is targeted to ease to €13,733m or 6.7% of GDP in 2012, while according to 2013 draft budget is seen closing at €13,280m or 6.6% of GDP, i.e. 0.1pp better than target.

Furthermore, MoF revised upwards general government arrears (>90 days) in August data, incorporating €903m of social security funds’ arrears that were created before YE’11. As a result, August arrears stood at €7,902m, implying an increase of €1.3bn compared to the unadjusted July figure and €0.3bn on a comparable basis. The bulk of general government arrears stems from social security funds (€4.1bn – 52% of total) and hospitals (€1.7bn – 22%), while state budget arrears stand at €0.9bn (12%) and local authorities at €0.8bn (11%).

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