S&P Global Ratings issues forecast of positive outlook for Azerbaijan's labour market

S&P Global Ratings, a prominent international rating agency, has issued a forecast suggesting a positive outlook for Azerbaijan's labour market.

According to Azernews, S&P predicts that the unemployment rate in the country will fall below 5% by the year 2024. This optimistic projection, outlined in Azernews' report citing the rating agency, indicates a favourable trend in Azerbaijan's employment landscape.

Specifically, S&P anticipates the unemployment rate to reach 4.7% in 2024, signaling a notable improvement compared to previous estimates by other international financial organisations. Typically, forecasts for unemployment in Azerbaijan have hovered around the range of 5% to 6%. However, S&P's forecast suggests that the actual unemployment rate may surpass these expectations and trend towards the lower end of the spectrum.

It is worth noting that while S&P's forecast is optimistic, it contrasts with the projections put forth by other international bodies. For instance, the International Monetary Fund (IMF) has issued a forecast predicting the unemployment level in Azerbaijan to be slightly higher, at 5.5% for the period spanning 2024-2025. This discrepancy underscores the variability in economic forecasts and the importance of considering multiple perspectives when analysing labour market trends.

Certainly, several economic and social factors can influence the unemployment rate in Azerbaijan. Let's look through those key factors.

Economic Growth: Strong economic growth typically leads to increased job opportunities, lowering the unemployment rate. Conversely, economic downturns can result in job losses and higher unemployment.

Government Policies: Government policies related to labour market regulation, taxation, investment incentives, and education and training programs can significantly impact employment levels.

Demographic Trends: Population growth, age structure, and workforce participation rates can affect supply and demand dynamics in the labour market.

Education and Skills: The availability of skilled labour and the alignment of workforce skills with market demands play a crucial role in determining employment levels.

Investment Climate: Foreign and domestic investment levels, business confidence, and the overall investment climate influence job creation and economic activity.

Global Economic Conditions: International trade, commodity prices, and global economic trends can affect Azerbaijan's economy and its labour market.

Technological Advancements: Automation, digitalization, and technological innovation can lead to job displacement in certain sectors while creating new employment opportunities in others.

Social Safety Nets: The effectiveness of social safety nets, including unemployment benefits and social assistance programs, can mitigate the impact of economic shocks on unemployment levels.

Labour Market Flexibility: The flexibility of labour market regulations, including hiring and firing practices, affects employers' willingness to hire and invest in labor.

Migration Patterns: Internal and international migration patterns can influence labour market dynamics by altering the supply and demand for labor in different regions and sectors.

These factors interact in complex ways and can vary over time, making it challenging to precisely predict unemployment levels. However, policymakers and analysts consider these factors when assessing and forecasting labour market conditions in Azerbaijan.