YEREVAN, February 13. /ARKA/. Amid low inflation rates, the Central Bank of Armenia has substantially eased monetary conditions, but this has had a limited impact on banks’ rates, the Eurasian Fund for Stabilization and Development’s (EFSD) regional economic review “Winter 2024-2025” says.
On February 4, the Central Bank of Armenia cut the refinancing rate by 0.25 p.p., to 6.75%. That was the 14th consecutive refinancing rate cut since June 2023.
“Banks’ response in terms of interest rate changes on loans and term deposits has been limited, indicating that the effectiveness of the interest rate channel is weak. In particular, in September 2024 compared to December 2023, weighted average interest rates on new term deposits in national currency decreased by 0.1 pp, while new loans, on the contrary, increased by 0.2 pp,” the review says.
According to the Central Bank of Armenia, the average rates on loans issued by Armenian commercial banks for up to 1 year, excluding demand loans, in December 2024 amounted to 13.71% against 13.41% in November of the same year and 12.50% in December 2023.
Central Bank chairman Martin Galstyan stated in February that the interest rate is kept high by strong demand for mortgages and consumer loans. Galstyan noted that there is no administrative resource that can be used to force banks to ignore the risks of issuing loans.
According to the regulator, the total lending of Armenia’s kombanks in December 2024 amounted to AMD 6.4 trillion, compared to about AMD 6.15 trillion in November of the same year and AMD 5.15 trillion in December 2023.
At the same time, the total volume of deposits attracted by Armenian banks in December 2024 amounted to AMD 6.46 trillion against AMD 6.18 trillion in November of the same year and AMD 5.68 trillion in December 2023. ($1 – AMD 396.56) -0-.
