MoF preliminary data (on a modified cash basis) on Greek budget execution in 5M’13 depicted an almost stable bottom-line outperformance (i.e. actual minus target) with budget and primary balance beating 5-month target by €3.2bn compared to €3.3bn in 4M’13,  >€2.8bn in Q1’13 and €1.84bn in 2M’13. Better-than-targeted fiscal performance is attributed to lower expenditure and higher PIB surplus and – to a lesser extent – smaller tax refunds.

Revenues (excl. tax refunds) retained a negative trend in May for seventh consecutive month at a slightly accelerating pace, retreating by 6.7% (from 5.8% in April, 13.0% in March, 1.7% in February and 11.4% in January) bringing 5-month figure down 8.0% y-o-y to €17,852m. Furthermore, 5M’13 revenues fell short of target by 3.1% or €562m with the revenue gap widening by €89m m-o-m. It is noteworthy that revenue shortfall stood €239m in January, eased by €33m m-o-m in February and then increased by €142m m-o-m in March, by €122m in April and by €89m in May.

According to MoF, revenue underperformance is attributed to lower revenues from: corporate income tax (by €272m due to the extension given for submitting their tax declarations), real estate property tax (by €164m), VAT (by €245m), special consumption tax on energy products (by €86m) and other non-tax revenues (by €139m) more than offsetting higher revenues from: tax on deposit interest (by €85m), wealth tax (by €193m) bank recap (by €119m) and indirect taxes (by €118m).

It is noteworthy that tax refunds dropped 60.8% y-o-y to €483m, €593m below 5-month target, resulting in net revenues at €17,432m down 4.1% y-o-y, yet slightly (0.4%) above target more than offsetting revenue (excl. tax refunds) shortfall.

On the contrary, primary expenditure continued heading south for third month in a row dropping by 6.8% y-o-y in May, following a 16.0% and 12.7% decrease in April and March respectively, bringing 5-month figure down 11.3% y-o-y to €18,170m beating target by 7.8% or €1.54bn. Interest payments fell sharply by 66.3% y-o-y to €2,873m in 5M’13 spot on target. Note that 5M’12 – and particularly March ’12 – figure was exceptionally high and incorporated one-off payments related to PSI. Overall, total expenditure stood at €21,865m down 25.2% y-o-y bettering 5-month target by 7.1% or €1.68bn.

Public Investment Budget (PIB) revenues rose 15.0% y-o-y to €1,718m (€358m or 26% above target), while PIB expenditure dropped 12.1% y-o-y to €1,141m (€1,109m or 49% below target). Overall, PIB exhibited a surplus of €577m in 5M’13 up 194% from last year’s €196m. It is also noteworthy that excluding PIB, 5M’13 budget deficit would have reached €4,433m, from €11,072m last year, implying a drop of 60%.

Overall, 5-month budget balance recorded a deficit of €3,857m, down 64.5% from last year’s figure of €10,876m (which included one-off payments related to PSI), significantly beating target by 45% or €3.2bn, with May exhibiting a deficit of €1,432m from €1,071m in April, €565m in March and €966m in February. Furthermore, reported 5-month figure is equivalent to 45.7% (or 5.5/12) of the FY’13 target of €8,444m.

Primary balance showed a deficit of €984m, down 58% from last year’s €2,350m, substantially outperforming 5-month target calling for a primary deficit of €4,165m by 76% or €3.2bn, with May recording a deficit of €678m from €850m in April and small surplus of €33m in March and €72m in February.

It is pointed out that 5M’13 bottom-line outperformance is attributed to lower expenditure (€1.68bn) as well as higher PIB surplus (€1.47bn) and – to a lesser extent – smaller tax refunds (€0.57bn) more than offsetting the shortfall in revenues (excl. tax refunds) of €0.56bn. Furthermore, bottom-line outperformance, although marginally narrowed to €3.2bn in 5M’13 from €3.3bn in 4M’13, still provides a safety cushion for the fiscal adjustment efforts in the remaining of the year.