1. This statement provides information that has become available since issuance of the Staff Report. The information does not alter the thrust of the staff appraisal.
2. Negotiations on a contract agreement for Albpetrol privatization could not be concluded within the stipulated 30-day period (since the announcement of the winning bid on October 3). The deadline has been extended by thirty days.
3. Recent data (January–October) indicate that the fiscal deficit was 1.9 percent of annual GDP, compared to 2.4 percent of annual GDP in the first 10 months of 2011. Revenues grew by 2 percent (y-o-y), while spending was broadly unchanged, largely because of a 15 percent reduction in capital spending.
4. Under the budget approved by the Council of Ministers on November 19, the 2013 fiscal deficit would increase to 3.4 percent of GDP, from the authorities’ projected 2012 deficit of 3 percent. Tax revenues are projected to increase by 5.4 percent, more than double their expected rate of growth in 2012. Pensions will continue to rise well above inflation, though wage bill growth is expected to be contained. Capital spending is projected to rebound strongly. No privatization receipts are assumed in the draft budget. Public debt would to climb to 62.4 percent of GDP next year.
5. Earlier this month, the Albanian Regulatory Entity (ERE) decided to proceed with revoking the private electricity distributor’s (CEZ) license because of the latter’s failure to abide by the terms of the privatization contract (e.g., loss reduction and investments to improve the grid). CEZ has 30 days to rectify the situation.
6. Financial soundness indicators for September suggest that nonperforming loans rose further to reach 22.7 percent of gross loans. The profitability of the banking system weakened further in the third quarter, while provisioning was broadly unchanged. Credit to the economy grew by 5.5 percent, compared to 14.5 percent in the first 9 months of 2011.