IBERSOL • 2023 Integrated Management Report

INTEGRATED MANAGEMENT REPORT 2023 the annual change in the HICP should fall from 5.3% in 2023 to 2.9% in 2024, converging to 2% in 2025, the ECB’s medium-term objective. The main risks to maintaining the growth of economic activity in Por- tugal are associated with external factors: the possible worsening of international geopolitical tensions (with an impact on the price of raw materials, the confidence of economic agents and world trade) and the maintenance of high interest rates by the ECB if inflation remains high. Situation in Spain The Bank of Spain’s macroeconomic projections indicate that GDP growth was 2.4% in 2023, with a slowdown expected in the following years: 1.6% in 2024, 1.9% in 2025 and 1.7% in 2026. The inflation rate fell from 8.3% in 2022 to 3.4% in 2023, and is expected to continue its downward trend in the following years: 3.3% in 2024, 2% in 2025 and 1.9% in 2026. In a context of fragility in the external environment and gradual trans- mission of restrictive monetary policy measures to economic activ- ity, the Spanish economy grew in the first and second quarters of 2023, slowing in the last two quarters of the year, while maintaining a growth rate above that of the Euro Area. Growth in economic activity in 2024 is expected to stabilise at levels slightly higher than those seen in the last six months. The high dy- namism that economic activity showed in the final stretch of 2022 and early 2023 suggests that, in terms of average annual rates, GDP growth will slow down between 2023 and 2024 – from 2.4% to 1.6% – before accelerating slightly in the 2025-2026 period. This development results of the implementation of the NGEU pro- gramme funds and the gradual recovery of the European economy, as well as the moderation of inflation, with the consequent recovery of real incomes for economic agents. The fact that the negative im- pact of restrictive monetary policies will peak in 2024 will also con- tribute to the acceleration of the GDP growth rate in the 2025-2026 biennium. 27