Portugal’s key medium term challenge is to raise income levels, to close the still large gap with more advanced OECD countries. This will require policies and reforms that raise output growth in a durable way, especially via higher labour and total factor productivity. Thanks to average annual GDP growth of about 3½ per cent since the mid 1980s, Portuguese living standards have much improved. However, there have been protracted periods of weak growth when the catching-up process stopped, including the most recent downturn. At this point in time, it is hard to know how much of the ongoing ...