Greek budget bottom-line significantly beat targets in February

MoF final 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 €1.84bn attributed to lower expenditure and higher PIB surplus as well as lower tax refunds.

Note also that MoF had revised 2013 – and accordingly monthly – budget targets, along with the release of budget preliminary figures on March 11, incorporating its latest forecasts included in the updated MTFS (tabled to parliament on February 8). In particular, 2013 net revenues and primary expenditure had been revised upwards by €0.4bn to €49.73bn 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 €2.04bn (from €2.29bn before) and budget deficit at €8.44bn (from €11.19bn).

Revenues (excl. tax refunds) retained a negative trend in February for fourth consecutive month yet at a decelerating pace retreating by 1.7% (from 11.4% in January) bringing 2-month figure down 7.4% y-o-y to €7,784m. Furthermore, 2M’13 revenues fell short of 2-month target by 2.6% or €206m with the revenue gap marginally lower m-o-m. According to MoF, revenue underperformance is attributed to lower-than-expected revenues from VAT (€189m or 7.2%), 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. In particular, direct taxes slipped 1.7% y-o-y to €2,988m reflecting a drop in income tax by 4.5% and property taxes by 38.1%. Indirect taxes retreated 18.6% y-o-y to €3,966m on the back of a significant decline of VAT revenues by 16.6% and consumption taxes by 25.3%.

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%. The bulk of cost cutting is mainly attributed to lower expenditure for salaries and pensions (down 4.6%) and grants to social security sector (down 26.2%). 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 €1,393m, from €1,495m last year, down 6.8%.

Overall, 2-month budget balance recorded a deficit of €789m, up 59.4% from last year’s figure of €495m, yet significantly beat 2-month target by 70% or €1.84bn, with February exhibiting a deficit of €966m from surplus of €177m in January and deficit of €4m in February ’12. Furthermore, reported figure is equivalent to 9.3% (or 1.2/12) of the FY’13 target of €8,444m.

Primary balance showed a surplus of €487m, up 32.3% y-o-y, substantially outperforming 2-month target calling for a primary deficit of €1,353m by 136% or €1,840m, with February recording a surplus of €72m from €415m in January. It is pointed out that 2M’13 bottom-line outperformance (vs targets) is attributed to lower expenditure (€0.83bn) and higher PIB surplus (€0.78bn) as well as lower tax refunds (€0.39bn) more than offsetting the shortfall in revenues (excl. tax refunds) of €0.21bn.

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