YEREVAN, April 29. /ARKA/. Armenia’s Central Bank said today it has cut the refinancing rate by 0.25 percentage points setting it at 5%. It said also the inflation in March 2020 was 0.5%, up from 0.1% inflation reported for the same month last year. As a result, the 12-month deflation declined to 0.1%.
The bank said the spread of coronavirus and the measures to stop it are having a great negative impact on the global economy, including on Armenia’s partner countries having increased the volatility of commodity prices, while the uncertainty and risks remain high.
According to the Central Bank estimates, the decline in economic activity in the second quarter will deepen due to a drop in demand and supply. The gross demand is estimated to remain weak in the future, which will in some way be mitigated by the stimulating effect of government measures to eliminate the social and economic consequences of the coronavirus pandemic.
The CB said given the external and internal current and projected developments, weakening demand, the current severe inflationary environment and the stabilization of financial markets, the Central Bank considers it appropriate to increase the stimulation of monetary conditions by lowering the refinancing rate.
The Board also estimates that in the current situation it will be necessary to maintain a stimulating position also in the medium term. As a result, inflation in the short term will remain low, approaching the target only at the end of the forecast horizon.
Currently, there is a rather high uncertainty regarding short-term and long-term economic developments, which the Central Bank is also trying to take into account in its actions.
The Armenian government said it will revise downward the earlier projected growth of 4.9 percent to 2 percent.