The weak macroeconomic conditions, the urgency of budgetary consolidation and the need for improving the effectiveness of public expenditure which are described in the previous chapters should not divert the attention of policy makers from moving forward in structural reform. The new government, in place since April 2002, has also emphasised the need to advance on a wide front in order to foster growth and productivity. This chapter starts by reviewing Portugal’s economic performance. It then focuses on key areas of a comprehensive growthoriented strategy for Portugal: enhancing human capital and improving labour market adaptability; putting in place conditions conducive to the adoption of new technologies and to the dynamism of entrepreneurial activity; and strengthening competition in product markets. A summary of the OECD’s main recommendations for further structural reforms is included at the end (Box 11). The chapter concludes with the discussion of three environmental dimensions of sustainable development: air pollution, water pollution and the sustainable use of natural resources.