Samoa's Central Bank board has decided to reduce its lending rate for local commercial banks from 7.85 percent to 5 percent.
The decision comes as the governor of the central bank, Leasi Tommy Scanlan, predicts the economy could be in recession by the end of June.
However he hopes the commercial banks will play a vital role to ensure the cost of funds are competitive to facilitate the private sector development and economic growth.
The drop in lending rate is part of the bank's decision to ease its monetary policy based on the current and latest trends in the global and domesticeconomies.
Samoa's economy is expected to decline by 1.3 percent in the current financial year as the adverse impact of the global downturn start to show up in the country's economic statistics according to the central bank's latest economic report.
Meanwhile, the deputy prime minister, Misa Telefoni, says economic indicators are still strong but he is closely monitoring the situation as minister for the private sector.