Latest MoF data show that general government cash deficit narrowed by 53.4% y-o-y to €9,383m in 10M’12 from €20,114m last year, with primary balance recording a surplus of €2,312m from deficit of €4,244m in 10M’11.

Current period data incorporate:

• A drop of state budget deficit by 47.7% y-o-y to €11,186m with primary deficit shrinking 98.9% to just €67m from €6,162m in 10M’11.

• Extrabudgetary funds’ (i.e. legal entities) surplus of €1,049m, 4.9% lower than last year’s figure of €1,103m.

• Local governments’ surplus of €301m almost 1/3 compared to last year’s surplus of €947m.

• Social security funds’ surplus of €452m from deficit of €775m in 10M’11.

Released data imply a further improvement of general government balance, which recorded a surplus of €306m in October from €200m in September, €720m in August and deficit of €729m in July and €1,697m in June. Furthermore, primary balance turned positive again with October showing a surplus of €1,063m from deficit of €191m in September and an exceptionally strong performance in August, when primary surplus stood at €1,669m. October bottom-line (€306m) primarily reflects a positive contribution (i.e. surplus) from state budget (€461m) and -to a lesser extent- extrabudgetary funds (€132m) more than offsetting social security funds and local governments’ deficits of €228m and €59m respectively.

It is also noteworthy that general government arrears (> 90 days to the private sector), including tax refunds, rose by €151m or 1.6% m-o-m and by €2,412m or 34.2% y-t-d to €9,461m at the end of October from €9,310m at the end of September and €7,049m at the end of December ’11. The bulk of general government arrears stems from social security funds (€4.6bn – 49% of total) and hospitals (€1.9bn – 20%), while state budget arrears stand at €0.92bn (9.7%), local authorities’ at €0.90bn (9.5%) and tax refunds at €0.76bn (8%).

We point out that general government balance remained positive for third consecutive month in October. Furthermore, cumulative primary surplus stood at €2.5bn in the August-October period, while general government arrears (> 90 days to the private sector) rose by €1.3bn over the same period, implying a net positive bottom-line result of €1.2bn over the past three months.