“By the end of the year we will have an inflation rate within our target band of 5-6 percent,” Artur Javadian, the bank’s governor, told journalists. “But I can assure you that it may well be even below the level targeted by us.”
The National Statistical Service (NSS) registered an annual inflation rate of 9 percent in May. It was down from 11.5 percent and 12.4 percent reported in March and February respectively.
As was the case last year, inflation was primarily pushed up by the increased prices of foodstuffs. That, in turn, resulted from global economic trends and last year’s sharp fall in Armenian agricultural output.
Javadian stood by Central Bank and government projections that the consumer price index will fall in the second half because of renewed growth in the agriculture sector. “In July and August we will have a fairly serious deflation,” he said.
The authorities predicted earlier this year that the sector will expand by 10 percent in 2011. However, this forecast was called into question this month by a series of violent hailstorms that inflicted significant damage on agricultural crops across the country.
Agriculture has been a major focus of the Armenian government’s economic policy this year. In particular, the government began subsidizing last April loans provided to Armenian farmers by three commercial banks. The latter agreed to slash their interest rates from over 20 percent to 8-14 percent.
Javadian said that as part of that lending scheme some 12,000 farmers have already received loans totaling 7.5 billion drams ($20 million). He put the average amount of subsidized loans at 620,000 drams.
According to the Central Bank chief, more farmers will receive relatively cheap credit later this year. “According to our opinion and expert’s opinion, the second phase of this program must be launched in late August or early September,” he said.
The program’s implementation has been far from smooth, however. Farmers in several impoverished villages in the northern Shirak and Lori provinces interviewed by RFE/RL’s Armenian service this month claimed that they are unable to get concessional agricultural loans because of stringent lending requirements set by the banks.
Tens of thousands of farmers are already struggling to repay loans that were extended by risk-averse banks at market rates before the launch of the scheme. Many of them reportedly risk losing their land and even houses used as collateral.