IBERSOL | Integrated Management Report 2022

STRATEGIC FRAMEWORK Situation in Portugal Recent data from the Bank of Portugal indicates that the Portuguese economy grew by 6,8% in 2022, forecasting growth of 1,5% in 2023, 2% in 2024 and 1,9% in 2025. Inflation reached 8,1% in 2022, with a gradual reduction estimated to 5,8% in 2023, 3,3% in 2024 and 2,1% in 2025. The sharp rise in inflation in the euro area led the ECB to begin a process of monetary policy normalisation, raising official interest rates in order to contain inflationary pressures. This increase has a direct impact on the reference rates of commercial banks, with repercussions on the cost of financing for companies and families. From the second quarter of 2022 onwards, economic activity registered a strong deceleration, after the recovery period from the pandemic crisis. The recent evolution of the Portuguese economy has been conditioned by the effects of the war in Ukraine, in particular the increase in geopolitical uncertainty and the energy crisis in Europe, which contributed to exacerbate the increase in costs and prices and the deterioration of the confidence of economic agents. In a context of high inflation and stagnation of real disposable income, the resilience of consumption is explained by the performance of the labour market - with a low employment rate -, the impact of public support measures and the recourse to savings accumulated during the pandemic. Growth is estimated to be contained in the first half of 2023, with projected moderation in household spending, some postponement of corporate investment plans and a slowdown in exports. From the second half of 2023, activity should accelerate, reflecting the expected easing of tensions in energy markets, the gradual recovery of households’ real income, the improving of external demand, the normalisation of global supply chains and greater absorption of European funds. In 2022 the public fiscal deficit was reduced and public debt as a percentage of GDP, although high, maintained a downward trajectory, and this favourable evolution is projected to continue in the coming years. 26