In a recent report, Fitch Solutions, a UK-based financial analysis firm, has predicted that the unemployment rate in 2023 is poised to inch up to 4.0%, a slight uptick from the 3.9% recorded in 2022. While this may seem like a marginal increase, it represents a continued trend of rising unemployment since 2017.
One of the factors contributing to this uptick is the reduced size of the labour force in the country, with the average life expectancy currently standing at around 64.3 years. This low life expectancy is attributed to insufficient government spending on healthcare and the prevalence of water-borne diseases and chronic illnesses, including HIV/AIDS. These health challenges have limited the availability of workers in the labour market.
Another issue highlighted by Fitch Solutions is the shortage of highly skilled workers, forcing employers to seek talent from abroad to fill the gaps in the domestic workforce. This reliance on foreign labour has implications for the overall employment landscape.
The report also raises concerns about the high levels of household debt in the country, which pose a risk to the consumer outlook. High household debt not only limits the future availability of credit but also places stress on current disposable incomes. As interest rates increase, debt servicing costs rise, further impacting household budgets.
In recent years, central banks in most markets have raised interest rates at record speeds, reaching levels not seen in a decade. Fitch Solutions points out that these central banks show few signs of reversing this trend, suggesting that households will continue to face an environment of higher debt servicing costs for the foreseeable future.
Despite these challenges, Fitch Solutions does anticipate a potential silver lining. If unemployment remains at 4.0% and is accompanied by easing inflation, it could lead to a rise in real wages for many households, offering some relief to consumers.
However, the firm underscores the importance of addressing the root causes of rising unemployment, including healthcare investment and workforce development, to ensure a more stable and prosperous economic future.