Greek budget balance continued to outperform targets in October

MoF final data (on a modified cash basis) on Greek budget execution confirmed preliminary figures (released on November 12) depicting a significantly improved performance in October compared to that of September with budget and primary balance recording a surplus for second month (after August) so far in 2012.

It is reminded that MoF had revised FY’12 – and accordingly monthly – budget targets (along with the release of budget execution preliminary figures) incorporating its latest forecasts included in the 2013 budget passed on November 11. In particular, FY’12 net revenues had been revised downwards by €1.25bn to €47.7bn, while budget and primary deficits are now targeted at €16.3bn and €4.6bn respectively, €0.86bn higher than previous estimates.

Revenues (excl. tax refunds) soared 14.3% y-o-y in October, following a 24.5% drop in September and an exceptionally strong performance in August (up 24.7%). Revenue increase mainly reflects a collection of (part of) September receipts in October (due to unions strike in late September), increased receipts from deposit taxes and increase in the indirect taxes of previous years as well as satisfactory collection of property taxes. In particular, direct taxes jumped 47.6% y-o-y in October, while indirect taxes dropped 7.3%, yet at a decelerating pace compared to the past three months. As a result, the drop in revenues decelerated to 3.7% y-o-y in 10M’12 from 5.8% y-o-y in 9M’12 with 10-month figure settling at €41.9bn. It is noteworthy that following the revision of 2012 targets, 10M’12 revenues beat targets – for the first time so far in 2012 – by €0.5bn or 1.3%.

Primary expenditure continued heading south for ninth month in a row, yet at a decelerating pace, easing by €4.6% in October, following a drop of 5.3% in September and 14.7% in August, bringing the 10-month figure down 8.5% y-o-y to €38.0bn slightly better (0.7%) than target. The cut in primary expenses is mainly courtesy of a 6.9% y-o-y reduction in salaries & pensions as well as in grants to social security sector.

Interest payments dropped to €11.1bn, down 27.0% y-o-y (FY’12 target: -28.2%), in line with the 10-month target. It is reminded that almost half of 10M’12 interest payments (€6.1bn) was recorded in March and related to the implementation of the PSI agreement.

Overall, 10-month budget deficit narrowed 41.9% y-o-y (the highest drop so far in 2012) to €12.3bn from €21.1bn last year with October recording a surplus of €461m. It is also noteworthy that bottom-line was supported by the significant positive contribution of Public Investment Budget (PIB), which exhibited a deficit of €0.6bn in 10M’12 from €1.9bn last year. Furthermore, 10-month reported figure outperformed 10-month (revised) target by €1.17bn or 8.7%, still providing a safety cushion for the fiscal adjustment efforts for the last two months of the year.

Primary balance turned positive in October recording a surplus of €0.93bn from deficit of €0.66bn in September and (an exceptionally strong) surplus of €1.67bn in August. Furthermore, 10-month primary deficit stood at €1.14bn, down 80.5% y-o-y, beating 10-month (revised) target by €1.15bn or 50.3%.

Over the last seven months, with the exception of September, bottom-line maintained a constantly improving trend. In particular:

  • Budget deficit, which stood at €1.9bn in April, gradually eased to €1.7bn in May, €1.6bn in June, €0.7bn in July, turning to a surplus of €0.7bn in August, reversing to a small deficit of €0.2bn in September and turning again to a surplus of €0.46bn in October.
  • Primary balance performance followed a similar, yet more volatile, trend, with primary deficit slipping from €1.4bn in April to €0.6bn in May and €1.0bn in June, turning to a surplus of €0.2bn in July and €1.7bn in August, reversing to a deficit of €0.6bn in September and resuming to a surplus of €0.93bn in October.
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