Page 5 - Seafarers---_Pension_Fund_Annual_Report_2020_s

Financial Operating Environment Annual Report of the Board

Mainly as a result of the coronavirus (COVID-19) pandemic, Finland’s Seafarers’ Pension Fund 2020 Annual Report
gross domestic product (GNP) declined by 3–4% in 2020. The various
restrictive measures had a severe effect on travel, hospitality and Insured persons
catering. Within navigation, the greatest impact was seen in passenger Pension recipients
traffic, with the number of passengers shrinking by approximately 22%,
while maritime transports declined by 6%. Remote working increased 5
dramatically, and the growth of online commerce was strong.

Around the turn of the year, several events occurred that are significant
in terms of future outlooks. Corona vaccines were developed at a very
rapid rate, and vaccinations could be initiated, although the limited
supply of vaccines still constitutes a challenge. The coronavirus variants
also present a risk that new vaccines will be required. According to the
most positive scenario, sufficiently high vaccination coverage would
be reached in the developed countries during summer 2021. Globally,
however, it will take a longer time. If the vaccine is not efficient against
the virus variants, different restrictive measures will be required, which
will slow down the economic development for a long time to come.
Moreover, Brexit, or the withdrawal of the United Kingdom from the
European Union, was realised, and it will have negative effects on the
economic development in Europe. On the other hand, the new regime in
the USA signifies an important turn towards international co-operation in
terms of, for example, climate change issues.

Forecasts for economic growth in Finland during 2021–2022 vary
between 2.5–3.5%, but there is still great uncertainty. Along with
COVID-19, the expansive monetary policy, which has prevailed since the
financial crisis, is accompanied by an exceptionally expansive fiscal policy.
Globally, there is a lot of accumulated consumption demand, which may
accelerate the growth of global consumption demand up to 5%.

Inflation expectations will continue to be low for the next few years,
and the central banks are not anticipated to change their exceptionally
expansionary monetary policies. The steering interest rates are assumed
to remain at their current level, but if the positive scenario is realised,
the long-term interests may slightly increase.

A tangible corrective movement was seen on the equity market in
March as the negative effects of COVID-19 were discounted in stock
exchange rates. The effects remained moderate in most fields, but in
those related to travel, the prices did not recover until towards the end
of the year when vaccines began to be ready for launch. Combined with
the heavy stimulus measures, this resulted in the rise of equity indices
to new record levels. The euro strengthened clearly and equity indices, in
euro, increased by 7% on average. When measured in local currencies,
for example, the USA saw its equity rates rise by more than 15%, which
was comparable to Finland.

The COVID-19 pandemic influenced the real estate market as well. The
increase of remote working expanded the demand for larger homes and
boosted the sales of detached houses and leisure homes. On the other hand,
the restrictions had an impact on, for example, hotels and restaurants, thus
weakening the rental revenues. In terms of office premises, the trend of
remote working further accelerated, and it is assumed that the increase in
remote working will, to some extent, be a permanent phenomenon, which
will be reflected in the demand for facilities.