Page 201 - MEDIASET ESPAÑA / 2013. Financial Statements, Management and Corporate Governance Report

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MEDIASET ESPAÑA COMUNICACIÓN, S.A. AND SUBSIDIARIES
MANAGEMENT REPORT FOR THEYEAR ENDED DECEMBER 31, 2013
(Expressed in thousand of euros)
THE SPANISH ECONOMY IN 2013
Data on the Spanish economy during 2013 indicates that Spain emerged from the recession during the second part
of the year, accumulating slight GDP increases during two consecutive quarters (+0.1% in 3Q2013 and +0.3% in
4Q2013), after a total of nine consecutive quarters of contractions. Such moderate growth rates evidently are not
worthy of overoptimism, as basic economic indicators (most notably, unemployment) are disproportionately negative.
Although the GDP posted a year-on-year drop of 1.2%, as discussed in the Management Report corresponding to the
consolidated interim financial statements at June 30, 2013, a slight relative indication of improvement in basic economic
data was noted. After such a dire 2012 (arguably the worst year of the crisis), a plateau growth trend arose, which is a
“sine qua non” condition making it possible that, through the progression of time, the negative trend gradually transforms
to positive, which seems to have finally occurred during the second half of the year.
Although definite data is not available, the 2013 global GDP is expected to be around 2.9%, which is the fourth
consecutive year of fall, mainly due to the fact that the growth rates of emerging economies have halved over the past
five years.The following situations prevail in developed economies:
Although 2013 forecasts for the US economy were a point lower than 2012 (1.8% vs. 2.8%), the tendency towards a
sustainable cruising growth rate seemed confirmed during the last two quarters, and became clearer once the two main
political parties reached a tax agreement at year end, which points to a 3% growth rate in 2014.
With respect to the Eurozone, the drop in the GDP during the year was approximately 0.4%, which is not only lower
than 2012, but is also indicative that things are looking up.
As mentioned previously, data for Spain at the date of preparation of these financial statements indicates that the GDP
dropped 1.2% in 2013, with a clear indication that as the year progresses things are heading towards a new cycle of
expansion. In this regard, with a 2.8% drop in internal demand, all the components have improved throughout the year,
with slight quarter-on-quarter steps forward starting in the summer; this has not been the case since 2010. Private
consumption is of key importance to our business, as it is directly linked to advertising; it showed several positive changes
during the third quarter.
Unemployment data also seems indicative of a change in the cycle when considering 4Q2013 and January 2014; for
the year as a whole, joblessness rose 1.3 points to an overall 26.4%.Without a doubt, reducing unemployment to more
tolerable levels is definitely one of the greatest hurdles for this changing cycle.
Against this backdrop, it is also important to note that the inevitable financial deleveraging of Spanish households,
which may be seen from contradictory points of view (a lessened burden of debt, which is positive, which also slows
down short-term consumption), seems to be a necessary condition to head in the direction of growth to reaching
solid ground. It is also worth noting that in recent months new credit transactions have increased substantially, including
those granted by our financial system to companies as well as consumers, which illustrates a trend towards credit
normalization.
Based on the above, the obvious question would be:What is the macroeconomic scenario facing Spain in 2014, and what
is the general backdrop against which our TV business will move forward? Based on events during 2013 (confirmation
that Spain began emerging from the recession during the second half of the year), as well as tendencies pointing
to a slow revival of economic activity, there is a widespread consensus that the GDP will grow 1%. This takes into
account that contribution from the external sector will continue to be of paramount importance, indicating that the
weight of national demand will be roughly half, with unemployment slightly decreasing although still around 25%. This
modest growth scenario is not without certain risks and threats which still have not completely dissipated, including
tax adjustment and budgetary processes in Europe as well as Spain, financial upheaval, slower growth rates in emerging
economies, and the sustainability of expansive tax and monetary policies in the US.