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YEREVAN -- Armenia's Central Bank has lowered the interest rate by 100 basis points to 6.25 percent, RFE/RL's Armenian Service reports.

The bank added that the rate cut, which should stimulate economic activity, is possible because macroeconomic trends put Armenia on track to meet its inflationary targets this year.

The National Statistical Service recorded an average inflation rate of 2.3 percent during the first quarter of 2009, a sharp decrease from the same period in 2008 despite a nearly 20 percent devaluation of the national currency, the dram, and an increase in the cost of utility services, which took effect on April 1.

Vache Gabrielian, the Central Bank's deputy governor, told RFE/RL that Armenia's macroeconomic performance will improve in the second half of the year because "substantial inflows will be channeled into the economy," a reference to the hundreds of millions of dollars in external loans recently secured by Armenia.

With Armenia's GDP shrinking by 9.7 percent from January-April, Gabrielan predicted at an economic forum in Yerevan that there will be an economic decline of 7 to 8 percent this year.

The Central Bank forecasted a full-year GDP drop of 5.8 percent as recently as last week.