Economic and fiscal developments until the end of the 1st quarter 2015

The CFP report Economic and fiscal developments until the end of the 1st quarter 2015 describes the fiscal developments in the General Government sector until the end of the 1st quarter 2015.

In the first quarter of 2015, general government recorded a primary deficit of 0.7% of GDP and a headline deficit of 5.8% of quarterly GDP. In both cases that accounts for an improvement of 0.1 p.p. of GDP in year-on-year terms, but it falls short of the forecast for the year as a whole. In effect the deficit recorded in the first quarter stands 3.1 p.p. above the objective laid down by the MF for 2015 (2.7% of GDP). This fact should constitute a warning, although it does not necessarily indicate the expected performance over the entire year, since subsequent developments in some of the more influential budget aggregates, such as tax revenue, cannot be directly extrapolated from their behaviour in the first three months of the year.

Up to March adjusted revenue recorded a less favourable year-on-year development than the annual goal set by the MF (3.5% and 4.6% respectively). This result was driven by the outcomes in tax revenue (4.3%) and social security contributions (4.6%).

In the first three months of 2015 adjusted public expenditure grew by 3.1% in year-on-year terms, a figure slightly above the forecasts for the year as a whole (2.9%). The growth was due mainly to primary expenditure which increased by 3.2% vis-à-vis the previous year. “Other capital expenditures” explained a third of that growth, while intermediate consumption and compensation of employees accounted for around 40%. However, the progress recorded in the latter should ease off in the coming quarters, reflecting the base effect of the reversal of the civil servant salary cuts that ran from June to September 2014. The change in intermediate consumption was driven by the increase in costs of PPP.

Although the public debt stock rose in the first quarter (up 643 M€), there was a decline in the public debt ratio which ended the period at 129.6% of GDP. The nominal increase was mainly justified by the budget deficit, since the stock-flow adjustments contributed to a decrease in public debt that quarter. Achieving the public debt ratio targets set out in the Stability Programme for the end of 2015 (124.2% of GDP) will require a fall of around 5.4 p.p. of GDP until the end of the year, which corresponds to 4,7 billion euros in nominal terms.

Date of last update: 09/07/2015