Economist says pension increase not prediction of inflation in Azerbaijan

The Azerbaijan state continues to take measures to improve the welfare of its population. On February 05, Azerbaijani President Ilham Aliyev signed a decree on indexation of labor pensions, which serves to strengthen the social protection and welfare of 1.1 million pensioners. With this order, all pensions increased from January 2024 by 11.2 percent. The increases are applied from January 1 of this year, and the increases to pensions for January will be paid to pensioners together with the pension for February.

For these new increases, which include a total of 1.1 million pensioners, an additional AZN 630m ($371m) will be spent annually.

Of course, it is not the first event taken to improve the well-being of the population. For example, with the President's decrees and orders, 4 social reform packages were executed in 2018-2023 to increase salaries, pensions, and other social payments.

In addition to these reforms covering more than 4 million citizens, the amount of annual funds allocated to AZN7bn ($4bn). As a result of these reforms:

1) The minimum wage increased 2.7 times (AZN130 - AZN345);

2) The average monthly salary increased by 71.3 percent (AZN545 - AZN933.8);

3) Median salary increased 2.2 times (AZN486);

4) The wage fund has increased 2.7 times;

5) Social benefits and scholarship payments have increased by 5 times (AZN400m per annum. Manat -AZN1.9bn);

6) The average monthly amount of targeted assistance has increased 2.8 times (AZN175 - AZN487);

7) The criterion of the need increased 2.3 times (AZN116 - AZN270), equal to the minimum of residence;

8) 10 new social payment type was established.

An important direction of social reforms covered pensions and significant steps have been taken in the last five years to strengthen the social protection of our retirees.

In each of the 4 social reform packages, pensions were also provided. As a result in 2018-2023:

a) Minimum pensions increased 2.5 times (AZN110 - AZN280);

b) The average monthly pension increased 2.1 times (AZN208 - AZN436);

c) The average monthly pension increased twice in age (AZN234 - AZN467);

In particular, in 2023, the average monthly amount of pensions increased by 19 percent.

However, the increase in pensions also causes a question in the society. As is known, when the revenue increases it impacts the inflation. Given that the revenue of 1.1 people, more precisely 10 percent of the population, has grown by 11.2 percent, will it trigger inflation?

In a comment to Azernews on the issue, economist Eldeniz Amirov noted that generally, price increases are carried out and indexed, not due to price increases in the markets, but according to the growth rate of average monthly salary. If we take general inflation, not food inflation, an 11.2 percent pension increase is higher than the inflation indicators.

“As for the increase to cover a large population, I do not think that this increase will somehow affect infiltration. Of course, the increase in revenues affects a certain amount of inflation. However, looking at the dynamics and volume of growth, we can say that. this increase will not seriously trigger infiltration,” economist Eldeniz Amirov concluded.