According to MoF preliminary data (on a modified cash basis), Greek budget bottom-line outperformance (i.e. actual vs target) narrowed by €1bn m-o-m to €2.2bn in 6M’13 from €3.2bn in 5M, largely attributed to a widening of revenue shortfall. 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 June for eighth consecutive month at an accelerating pace, retreating by 13.7% (from 6.4% in May and 5.8% in April) bringing 6-month figure down 8.9% y-o-y to €21,371m. Furthermore, 6M’13 revenues fell short of target by 7.0% or €1,617m with the revenue gap significantly widening by €1,067m m-o-m also attributed to conjunctural factors expected to be reversed in the coming months.

According to MoF, revenue underperformance is attributed to lower revenues: a) by €707m due to delay in the payment by Greek banks of the 10% interest on preferred securities as well as delay in receiving the returns of European central banks’ holdings of GGBs and b) by €200m due to the tax employees’ strike at the last two days of June. Furthermore, MoF collected lower revenues in June also courtesy of the extension given for the filing of personal income tax forms and delay in sending real estate property tax notices.

It is noteworthy that tax refunds dropped 66.2% y-o-y to €600m, well below the FY’13 target of -21.4% and €684m below 6-month target, resulting in net revenues at €20,837m down 3.9% y-o-y, €906m or 4.2% below target.

On the contrary, primary expenditure continued heading south for fourth month in a row at an increasing pace retreating by 13.7% y-o-y in June, following a 6.7% drop in May, bringing 6-month figure down 11.5% y-o-y to €21,407m and beating target by 8.2% or €1,915m. Interest payments fell sharply by 62.0% y-o-y to €3,480m in 6M’13, €163m above target. Note that 6M’12 – particularly March ’12 – figure was exceptionally high and incorporated one-off payments related to PSI. Overall, total expenditure stood at €25,792m down 23.3% y-o-y beating 6-month target by 7.1% or €1,975m.

Public Investment Budget (PIB) revenues rose 15.1% y-o-y to €1,730m (€50m or 3% above target), while PIB expenditure dropped 12.8% y-o-y to €1,772m (€1,078m or 38% below target). As a result, PIB exhibited a small deficit of €42m in 6M’13 down 92% from last year’s €530m. It is also noteworthy that excluding PIB, 6M’13 budget deficit would have reached €4,955m, from €11,947m last year, implying a drop of 59%.

Overall, 6-month budget balance recorded a deficit of €4,997m, down 60% from last year’s figure of €12,477m (which included one-off payments related to PSI), significantly beating target by 31% or €2.2bn, with June posting a deficit of €1,154m from €1,418m in May. Furthermore, reported 6-month figure is equivalent to 59.2% (or 7.1/12) of the FY’13 target of €8,444m.

Primary balance showed a deficit of €1,516m, down 54% from last year’s €3,316m, substantially outperforming 6-month target calling for a primary deficit of €3,877m by 61% or €2.36bn, with June recording a deficit of €546m from €664m in May and €826m in April, implying an improving trend over the past three months.

It is pointed out that 6M’13 bottom-line outperformance is attributed to lower expenditure (€1.92bn) as well as higher PIB surplus (€1.13bn) and – to a lesser extent – smaller tax refunds (€0.68bn) more than offsetting the shortfall in revenues (excl. tax refunds) of €1.62bn. Furthermore, bottom-line outperformance, although narrowed by €1bn m-o-m to €2.2bn in 6M’13 from €3.2bn in 5M’13, still provides a safety cushion for the fiscal adjustment efforts in the second half of the year.