Economic operating environment
Central banks’ pro-active monetary policy supported the economy
The situation in the U.S. cast a brighter light on the 2013 economic year, and a clearer general picture of the global economy emerged. Economic problems in the eurozone also levelled out, but the crisis has not yet been overcome. The year was marked by the central banks’ dynamic monetary policy interventions in the markets, and the consequent strong upswing, particularly in the stock markets of developed countries.
In the U.S., growth picked up towards the end of the year, bolstered especially by the increase in consumer spending, which was supported by the strengthening housing market and a decline in unemployment. The strengthening of the economy has increased the expectation that the Central Bank will begin to unwind its monetary policy stimulus. The U.S. Central Bank has announced it will continue with its measures: the monetary policy stimulus will continue for as long as is necessary. U.S. economic recovery has been slow compared to previous economic cycles.
Europe seeks balance and anticipates strengthened recovery
In the eurozone, progress has been made in balancing public finances in troubled countries, and growth expectations have slightly improved. The strong euro presents a challenge to the competitiveness of many eurozone countries. Although signs of a pick-up in industrial production began to emerge towards the end of the year, simultaneous savings measures and a wage freeze could curtail consumer spending and impede inflation in the entire eurozone. The European Central Bank has announced that it is technically ready also for negative interest rates.
Capital markets showed strong development in 2013. The aggressive monetary policy in the U.S. propelled the securities markets to record figures. The financial markets are currently undergoing an unprecedented wave of regulation tightening and building. Increasing regulation will inevitably restrict lending and raise financing costs.
No growth in Finland’s economy
Finland’s economic development in 2013 was very sluggish. Finland lags behind its peer countries in economic growth. Our exports recover after a delay, and we face considerable challenges in our business and trade structures and in our public finances. Industrial production figures and export volumes shrank during the year. The added value of our exports has diminished. Although unemployment is higher, considering the economic situation, it is still at a reasonable level. This is because as the population ages, growth in potential workforce slows. Weak growth and the changing age structure of the population are widening the sustainability gap in Finland’s public finances. The significance of the earnings-related pension system is highlighted in closing the gap, since earnings-related pension assets are considered a part of the national economic accounts and pension legislation is reflected in the supply of workforce.
Strong solvency is Varma’s strategic choice
Varma’s task is to invest pension assets profitably and securely. The financial crisis has hit pension systems and institutional investors worldwide. In the prevailing highly challenging and difficult-to-predict market situation, Varma’s priority has been on fostering strong solvency. We strive for the best possible return on investments based on our chosen risk profile in order to secure the payment of pensions. Strong solvency and pro-active and prudent diversification of investments are especially important in a demanding market situation.
In the short-term, the goal of extending careers and companies’ financial requirements do not necessarily match. A number of Varma’s client companies are also experiencing difficult transformations. Varma’s strategic goal is to offer effective pension insurance services. The ability to understand customers’ needs is highlighted during major economic shifts. Varma is a strong expert in handling earnings-related pensions and a preferred specialist partner in workability management. Varma’s goal is to be the most efficient pension insurance company and to offer its customers the best client bonuses in the sector.