However, savings are higher than expected due to a better performance of personnel spending following a faster-than-anticipated reduction in public sector employment, the Commission said.
The Commission estimates the budget deficit will fall to 4.9% of GDP in 2011, from 6.9% of GDP in the previous year.
“The austerity measures taken by the authorities in July 2010 continued to have a decreasing effect on the deficit in the first half of 2011. Moreover, total revenue is expected to increase compared with 2010, although it has been showing signs of underperformance in the July and August budget execution,” the report noted.
It said income from both value added tax and excises was better than expected in the first six months of the year as a result of improved tax collection, but excises have been underperforming in the budget execution for end-August.
Non-tax revenue has also been lower than projected, while other items are evolving broadly in line with expectations, the report noted.