As the world cuts jobs, Azerbaijan boosts self-employment Turning challenges into opportunities

Geopolitical tensions, increasing military conflicts, sanctions, trade wars, and climate-related challenges have in recent years triggered a global recession, declining production, and reduced commercial activity. All of this has negatively affected global employment. According to the United Nations’ International Labour Organisation (ILO), the global employment outlook for this year has been revised downward by seven million jobs.

To mitigate these negative effects, ILO experts suggest strengthening state support in the labour sector and expanding self-employment programmes. This area is developing very successfully in Azerbaijan, including in the Karabakh region. It is expected that the number of Azerbaijani citizens participating in self-employment programmes will exceed 110,000 by the end of 2026.

According to experts from the relevant UN body, the series of crises observed in the post-pandemic period—including escalating conflicts in the Middle East, Asia, and Africa, and particularly the nearly four-year-long Russia–Ukraine war—has caused serious disruptions to value chains, logistics, raw material transit, and related sectors. The 2022 energy crisis, followed by the 2023 recession and surging inflation, has affected even previously prosperous European countries, leading to declining production and shrinking labour markets.

Meanwhile, this year’s US tariff disputes are directly impacting the global labour market. The ILO estimates that around 84 million jobs in 71 countries—primarily in the Asia-Pacific region, as well as in Canada and Mexico—are directly or indirectly linked to US consumer demand. Intensifying climate-related challenges, particularly freshwater shortages, are also driving job losses in rural areas. Finally, the ILO projects that in the near future, nearly one in four workers worldwide could see their jobs significantly transformed by the adoption of artificial intelligence (AI).

In the ILO’s mid-year report, World Employment and Social Outlook, updated forecasts for global employment in 2025 were presented. The report notes that a total of 53 million new jobs are expected worldwide—7 million fewer than previously projected. The ILO identifies geopolitical tensions and disruptions in global trade as the main factors behind the worsening economic outlook and the slower growth in employment.

The projected global employment growth for this year has been revised down from 1.7% to 1.5%, reflecting a slowdown in global GDP growth to 2.8%, compared with the previous forecast of 3.2%.

The global negative trends outlined above have the greatest impact on the labour markets of developing countries, including the post-Soviet region. In this regard, Azerbaijan’s situation is slightly better than in recent years. According to forecasts by the International Monetary Fund (IMF), the country’s unemployment rate is expected to decline from 5.4% in 2024 to 5.3% in 2025, and remain at 5.3% in 2026.

This relative stability in the local labour market is explained by active government–private sector partnerships in the post-pandemic period, which supported private sector activity, increased production growth, and expanded non-oil exports. Budgetary funds were also used to establish new agro-industrial production clusters. As a result, the demand for workers in Azerbaijan grew, particularly in connection with large-scale infrastructure and construction projects in the Karabakh region. Indirectly, this “major construction effort” boosted employment in the construction sector and building materials production, while also providing contracts for architecture, design, consulting, transport, and other specialised companies.

In particular, according to data from the Center for Analysis of Economic Reforms and Communications (CAERC), under the implementation of the national strategy “Great Return to the Liberated Territories”, the population living in territories freed from occupation reached approximately 55,000 by October. By the end of 2026, the number of people returning to their homes is expected to exceed 100,000. Consequently, both the demand for skilled workers and the number of permanent jobs for residents in the newly established towns and villages will increase.

The State Employment Agency under the Ministry of Labour and Social Protection of the Population continues to actively support the employment of residents relocated to the liberated territories. By November of this year, employment was provided to 7,027 residents: 4,836 were placed in available vacancies, 589 participated in self-employment programmes and established small family-run enterprises, and an additional 1,185 self-employed individuals have registered as sole proprietors.

It is particularly important to highlight the key role of Azerbaijan’s self-employment support programme. According to the World Bank, in terms of population coverage in this area, Azerbaijan clearly leads the South Caucasus region. The presidential decree “On Additional Measures to Ensure Self-Employment of the Population” in 2016 marked the starting point for the country’s most extensive microbusiness financing programme.

The number of citizens participating in the self-employment programme has steadily grown, increasing from 1,232 in 2017 to more than 17,300 in 2023. According to forecasts, Azerbaijan plans to involve an additional 9,200 citizens in the programme by 2025. Over nine years, more than 95,000 unemployed or job-seeking citizens have participated in the programme.

Under the self-employment programme, micro-entrepreneurs and their families receive tools, equipment, and financial support to develop apiaries, small livestock farms, projects in other areas of the agricultural sector, as well as small service and retail businesses. These microbusinesses are also supported with specialist consultations for developing long-term business plans and providing basic knowledge in tax accounting.

“In Azerbaijan, the number of people participating in the self-employment programme is expected to exceed 110,000 by the end of 2026,” recently stated MP Musa Guliyev during discussions of the draft laws “On the 2026 State Social Protection Fund Budget” and “On the 2026 Unemployment Insurance Fund Budget”.

According to the MP, next year 77 million manats ($45.3 million), or 28.9% of the Unemployment Insurance Fund’s (UIF) expenditures, will be allocated to financing self-employment measures: “In 2026, the fund’s resources are expected to bring 8,000 people into the self-employment programme, with an additional 7,000 participants involved under an agreement with the World Bank.”

Unfortunately, the self-employment sector also faces certain challenges. Individual business ventures tend to perform relatively well during the initial acceleration phase, when active support from government bodies is available. However, in the subsequent period, a portion of self-employed individuals in Azerbaijan are unable to maintain the profitability levels projected in their business plans and face low income and instability, which eventually forces them to discontinue their projects.

Self-employed individuals also encounter difficulties obtaining bank loans due to complex procedures, collateral requirements, and insufficient loan amounts. While these banking challenges can be bypassed by turning to non-bank credit organisations (NBCOs), the high risk associated with unsecured lending keeps interest rates and fees at around 30% or higher.

There are also structural limitations in the self-employment segment, including the inability to hire employees under labour contracts and income caps, exceeding which requires registration as VAT payers. Certain types of commercial activity are also prohibited for self-employed individuals—for example, the sale of excisable goods such as alcohol, tobacco products, and medicines.

Overall, self-employment as a distinct area of activity in Azerbaijan is still relatively new. As a result, the legal and regulatory framework in this field, as well as certain administrative issues, remain not fully settled. It is hoped that the State Employment Agency will continue its efforts to improve the functioning of self-employed microbusiness operators.