MoF preliminary data (on a modified cash basis) on Greek budget execution in March depicted a widening of bottom-line outperformance (i.e. actual minus target) by €1bn m-o-m with budget and primary balance beating 3-month target by €2.8bn compared to €1.8bn in 2M’13. Better-than-targeted fiscal performance is attributed to higher PIB surplus as well as lower expenditure and tax refunds.

Revenues (excl. tax refunds) retained a negative trend in March for fifth consecutive month at an accelerating pace retreating by 13.0% (from 1.7% in February and 11.4% in January) bringing 3-month figure down 9.1% y-o-y to €10,872m. Furthermore, 3M’13 revenues fell short of 2-month target by 3.1% or €351m with the revenue gap widening by €145m m-o-m. In particular, revenue shortfall stood €239m in January easing by €33m in February and increasing by €145m in March.

Revenue underperformance is attributed to lower-than-expected revenues from VAT (€260m or 7.3%), other consumption taxes (€144m) and special consumption tax on energy products (€55m or 5.1%), while revenues from personal income and property taxes outperformed targets by €31m (1.5%) and €101m (16.6%) respectively. It is noteworthy that tax refunds dropped 58.9% y-o-y to €213m, €467m below 3-month target, resulting in net revenues at €10,721m down 6.3% y-o-y, yet 1.5% above target more than offsetting revenue shortfall.

On the contrary, primary expenditure resumed a negative trend dropping by 12.2% in March, after a marginal rise of 0.4% in February, bringing 3-month figure down 11.0% y-o-y to €11,198m beating target by €1,073m or 8.7%. Interest payments fell sharply by 73.0% (-90% in March) to €1,874m slightly above target. Note that last March figure of €6.1bn was exceptionally high and incorporated one-off payments related to PSI. Overall, total expenditure stood at €13,235m down 32.6% y-o-y bettering 2-month target by €1,153m or 8.0%.

Public Investment Budget (PIB) revenues rose 16.5% y-o-y to €1,627m (€837m or 106% above target), while PIB expenditure eased 1.8% y-o-y to €479m (€671m or 58.3% below target). Overall, PIB exhibited a surplus of €1,148m in 3M’13 up 26.3% y-o-y from last year’s €909m. it is also noteworthy that excluding PIB, 3M’13 budget deficit would have reached €2,514m, from €8,187m last year, implying a drop of 69.3%.

Overall, 3-month budget balance recorded a deficit of €1,366m, down 81.2% from last year’s figure of €7,279m (which included one-off payments related to PSI), significantly beating target by 67% or €2,819m, with March exhibiting a deficit of €577m from €966m in February. Furthermore, reported figure is equivalent to 16.2% (or 1.9/12) of the FY’13 target of €8,444m.

Primary balance showed a surplus of €508m, from deficit of €334m last year, substantially outperforming 3-month target calling for a primary deficit of €2,338m by 122% or €2,846m, with March recording a surplus of €21m from €72m in February and €415m in January.

It is pointed out that 3M’13 bottom-line outperformance is attributed to higher PIB surplus (€1.5bn) as well as lower expenditure (€1.15bn) and tax refunds (€0.5bn) more than offsetting the shortfall in revenues (excl. tax refunds) of €0.35bn. Furthermore, the widening of fiscal outperformance by €1bn m-o-m to €2.8bn in 3M’13 from €1.8bn in 2M’13 provides a safety cushion for the fiscal adjustment efforts in the next three quarters of the year.

Note that MoF published for the first time Q1’13 ‘modified’ bottom-line data including payments of previous year tax refunds (€570m) and settlement of general government arrears (€1,099m), resulting in an ‘adjusted’ Q1’13 primary deficit of €1,161m (vs reported surplus of €508m) and budget deficit of €3,035m (compared to reported of €1,366m). Taking into account the projection for settlement of €8bn arrears to the private sector in 2013, the comparable (to the ‘modified’ figures) FY bottom-line targets are adjusted accordingly to €10,044m (vs reported of €2,044m) for primary deficit and to €16,444m (vs reported of €8,444m) for budget deficit.