Deficit contained as spending is cut

Reduced tax refunds, the curtailing of the Public Investment Program and the containment of expenditure by about 1 billion euros have led to the budget deficit being 1.3 billion euros lower than the target set for the first quarter of the year, according to official figures released on Wednesday by the Finance Ministry.

Data for the January-March period showed that the shortfall amounted to 7.3 billion euros against a target of 8.6 billion euros set by the year?s revised budget for this period. Still, compared with the deficit in the same period last year, data indicate a rise of 52.7 percent, or 2.5 billion euros. For the whole of this year the deficit is forecast at 14.1 billion euros.

As far as revenues are concerned, the target was missed by 167 million euros, but the lag would have exceeded 200 million had the state not stopped paying third parties such as suppliers, construction companies etc. Net revenues amounted to 12.8 billion euros in the year?s first three months against a target for 12.97 billion.

The ministry attributed the shortfall in revenues to the reduction in receipts from the special consumption tax on fuel, mostly due to the bigger-than-expected drop in gasoline and heating oil consumption, as well as to the reduction in value-added tax revenues as a result of the fall in domestic demand. Compared with the same quarter last year, though, revenues have grown by 9.1 percent.

Regarding tax refunds, the ministry had set a target for an amount of 729 million euros, but has only delivered 518 million as the state coffers remain empty.

Expenditure amounted to 20.1 billion euros, which was 1.4 billion less than the 21.5-billion-euro target set by the supplementary budget for 2012. The main reason for this containment has been the curtailing of spending for the Public Investment Program by some 462 million euros. However, compared with the same quarter last year, budget spending has increased by 21.8 percent.

The question now is how the budget figures will shape up in this second quarter, which also includes next month?s general election.