Greek budget bottom-line significantly outperformed targets in February

MoF preliminary data (on a modified cash basis) on Greek budget execution in February depicted a  significant outperformance at bottom-line with budget and primary balance beating 2-month target by €1.8bn attributed to lower tax refunds and expenditure as well as higher PIB surplus.

Note also that MoF revised 2013 – and accordingly monthly – budget targets incorporating its latest forecasts included in the updated MTFS (tabled to parliament on February 8). In particular, 2013 net revenues and primary expenditure were revised upwards by €0.42bn to €49.55bn and by €0.1bn to €45.15bn respectively. Interest payments were lowered by €2.5bn to €6.4bn, reflecting the positive impact from debt buyback conducted in December with a consequent downward revision of total expenditure by €2.35bn to €53.46bn. As a result, 2013 primary deficit is now expected at €2.03bn (from €2.29bn) and budget deficit at €8.43bn (from €11.19bn).

Revenues (excl. tax refunds) retained a negative trend in February for fourth consecutive month yet at a decelerating pace retreating by 2.4% (from 11.4% in January) bringing 2-month figure down 7.7% y-o-y to €7,760m. Furthermore, 2M’13 revenues fell short of 2-month target by 2.9% or €230m with the revenue gap remaining stable m-o-m. Revenue underperformance is attributed to lower-than-expected revenues from VAT (€213m or 8.1%), other consumption taxes (€192m or 33.2%) and vehicle circulation fees (€134m or 57.9%), while revenues from personal income and property taxes outperformed targets by €206m (18.7%) and €122m (33.1%) respectively.

Despite a marginal upward movement in primary expenditure in February, 2-month figure dropped by 10.4% y-o-y to €7,738m beating 2-month target by €766m or 9.0%. Interest payments sharply rose by 46.1% (+156% in February) to €1,275m, spot on 2-month target. It is noteworthy that February figure of €1bn accounts for 1/6 of the FY’13 target of €6.4bn. Overall, total expenditure stood at €9,143m down 4.4% y-o-y bettering 2-month target by €832m or 8.3%.

Public Investment Budget (PIB) revenues dropped 25.8% y-o-y to €884m (€454m or 106% above target), while PIB expenditure rose 46.1% y-o-y to €279m (€321m or 53.5% below target). Overall, PIB exhibited a surplus of €605m in 2M’13 down 39.5% y-o-y from last year’s €1bn. it is also noteworthy that excluding PIB, 2M’13 budget deficit would have reached €1,417m, from €1,495m last year, down 5.2%.

Overall, 2-month budget balance recorded a deficit of €813m, up 64.2% from last year’s figure of €495m, yet significantly beat 2-month target by 69% or €1.8bn, with February exhibiting a deficit of €990m from surplus of €177m in January and deficit of €4m in February ’12. Furthermore, reported figure is equivalent to 9.6% (or 1.2/12) of the FY’13 target of €8,433m.

Primary balance showed a surplus of €463m, up 25.8% y-o-y, substantially outperforming 2-month target calling for a primary deficit of €1,353m by 134% or €1,816m, with February recording a surplus of €48m from €415m in January. It is pointed out that 2M’13 bottom-line outperformance (vs targets) is attributed to lower tax refunds (€0.4bn) and expenditure (€0.8bn) as well as higher PIB surplus (€0.8bn) more than offsetting the shortfall in revenues (excl. tax refunds) of €0.23bn.

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