MoF final 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 c€1bn m-o-m with budget and primary balance beating 3-month target by >€2.83bn compared to €1.84bn 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 €10,875m. Furthermore, 3M’13 revenues fell short of 3-month target by 3.1% or €348m with the revenue gap widening by €142m m-o-m. In particular, revenue shortfall stood €239m in January easing by €33m in February and increasing by €142m in March.

Revenue underperformance is attributed to lower-than-expected revenues from VAT (€217m or 6.1%), 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 €40m (3.9%) and €101m (16.6%) respectively. In particular, direct taxes slipped 8.0% to €4,171m, reflecting a drop in income tax by 3.7% to €1,995m (in line with target) and a 44.2% decline in property taxes to €708m, yet beating 3-month target. On the contrary, indirect taxes retreated 14.7% to €5,648m, on the back of a 15.3% and 16.1% drop in VAT revenues and consumption taxes.

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 12.7% in March, after a marginal rise of 0.4% in February, bringing 3-month figure down 11.1% y-o-y to €11,181m beating target by €1,090m or 8.9%. The bulk of cost cutting is mainly attributed to lower expenditure for salaries and pensions (down 4.9%) and grants to social security sector (down 24.2%)

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 €13,213m down 32.7% y-o-y bettering 3-month target by €1,175m or 8.2%.

Public Investment Budget (PIB) revenues rose 15.5% y-o-y to €1,614m (€824m or 104% 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 €1,135m in 3M’13 up 24.9% from last year’s €909m. It is also noteworthy that excluding PIB, 3M’13 budget deficit would have reached €2,489m, from €8,187m last year, implying a drop of 69.6%.

Overall, 3-month budget balance recorded a deficit of €1,354m (€12m better than preliminary figure), down 81.4% from last year’s figure of €7,279m (which included one-off payments related to PSI), significantly beating target by 67.6% or €2,831m, with March exhibiting a deficit of €565m from €966m in February. Furthermore, reported 3-month figure is equivalent to 16.0% (or 1.9/12) of the FY’13 target of €8,444m.

Primary balance showed a surplus of €520m, from deficit of €334m last year, substantially outperforming 3-month target calling for a primary deficit of €2,338m by 122% or €2,858m, with March recording a surplus of €33m 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 (€1.18bn) and tax refunds (€0.47bn) more than offsetting the shortfall in revenues (excl. tax refunds) of €0.35bn. Furthermore, the widening of fiscal outperformance by c€1bn m-o-m above €2.8bn in 3M’13 from €1.84bn in 2M’13 provides a safety cushion for the fiscal adjustment efforts in the next three quarters of the year.