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Crystal Ball Gazing : 2003 Economic Expectations
What level of economic growth can be expected in Canada and the
United States this year? Will this mean an increased rate of inflation? How will interest
rates and the Canadian dollar be affected? Economists’ predictions for growth,
inflation, markets and the dollar will be particularly crucial for pension fund
decision making in 2003.
The two keynote articles in this issue of the Watson Wyatt Memorandum
focus on the results of Watson Wyatt Canada’s recently released 22nd Survey of
Economic Expectations and what they mean for pension fund investment and
funding. In addition, we present highlights from the WorkCanada™ 2002 study.
Investment Insight
The past few years have been punctuated by negative equity markets and low interest rates, both in Canada and abroad. The net result is that many pension plans have been left in a much diminished position. As a result, several questions must now be addressed:
- What is the economic environment expected to be over the mid-term?
- What will these forecasts mean for financial markets?
- How can pension funds maximize returns in these circumstances?
Pension Prophecies
Pension plans are facing a double whammy. Scary markets have reduced asset
values, while sponsors of defined benefit plans also face increased
liabilities. Volatility is a prime worry for financial officers in
organizations sponsoring a pension plan. Not only is it important to review
the investment, funding and accounting policies in managing volatility, but
innovative plan design can also be used as a tool.
The People Challenge: WorkCanadaTM 2002
Canadian companies have their work cut out for them. While data from the
WorkCanadaTM 2002 study shows that most Canadian employees are committed to
their organizations, the study also reveals several trouble spots that, if left
unchecked, threaten firms’ competitiveness.
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