The budget deficit from January to May widened to -0.88% of GDP, from -0.65% in the January to April period. Revenues are up by 12.7% year on year on VAT collection (+16.8% in May-18 vs May-17) and higher social security contributions (+35.5%YoY).
...but even higher spending
Expenditures grew 18.4% YoY, with spending on wages up 22.3% YoY, further increasing the share of quasi-permanent spending. Social assistance also increased 10.5% YoY, thus bringing the share of public sector wages and social assistance to 62.2% of GDP from 61.4% in April 2018.
We expect the mid-year budget revision to be quite substantial if the government is to remain committed to the -3.0% of GDP deficit, as economic growth is well below what the government expected while salaries and social security spending keep increasing their share in the total GDP.