MoF preliminary data (on a modified cash basis) on Greek budget execution (released on December 10) depicted a softer performance in November compared to that of the previous month, yet all core budget items continued to outperform targets.

Revenues (excl. tax refunds) resumed a negative trend in November retreating by 9.2% y-o-y, after a 14.3% increase in October and a 24.5% drop in September. As a result, 11-month figure eased 4.2% y-o-y (10M’12: -3.7%) to €45.8bn, slightly outperforming 11-month target by €0.3bn or 0.7%. According to MoF, better-than-expected revenues are attributed to increased income taxes, property taxes, non-tax revenues and insurance taxes.

Primary expenditure continued heading south for tenth month in a row, at an accelerating pace, slipping by 18.3% in November, following a drop of 4.6% in October and 5.3% in September, bringing the 11-month figure down 9.5% y-o-y to €42.0bn, 1.1% better than target.

Interest payments dropped to €11.4bn down 26.4% y-o-y (FY’12 target: -28.2%), in line with the 11-month target. It is reminded that almost half of 11M’12 interest payments (€6,083m) was recorded in March and was related to the implementation of the PSI agreement.

Overall, 11-month budget deficit narrowed by 39.9% y-o-y (the second highest drop so far in 2012) to €12.9bn from €21.5bn last year, with November recording a deficit of €0.66bn from surplus of €0.46bn in October. It is noteworthy that bottom-line was supported by the significant positive contribution of Public Investment Budget (PIB), which exhibited a deficit of €0.67bn in 11M’12 from €1.64bn last year. Furthermore, 11-month reported figure bettered 11-month target by €2.1bn or 14.1%, still providing a safety cushion for the remaining of the year.

Primary balance turned negative in November recording a deficit of €346m from surplus of €930m in October and deficit of €658m in September. Furthermore, 11-month primary deficit stood at €1.5bn, down 75.1% y-o-y, significantly beating 11-month target by €2.1bn or 58.7%.

Despite the softer fiscal performance recorded in November compared to that of the previous month, we highlight that cumulative budget and primary balances remain positive over the past four months. In particular, budget as well as primary surpluses amount to €1.6bn and €0.3bn respectively in the Aug – Nov period, reflecting the strong fiscal performance in August and September, when revenues rebounded increasing at double-digit levels resulting in a positive bottom-line outcome, more than offsetting the softer performance in September and November, when revenues resumed a negative trend.