Portugal saw a stagnation of its convergence process over the 2000s and the great recession is likely to hold back potential growth over the coming years. Weak productivity gains across most sectors of the economy have been at the origin of slow growth. Productivity growth needs to be boosted by an improved business environment, notably through further easing licensing procedures at the local level and reducing the length of the judicial process. In the medium run, improving transport infrastructure is fundamental to achieving higher competitiveness. The government should play a proactive role, but investment decisions should be selective and based on transparent cost-benefit analysis. In the long run, the key issue is to close the educational gap, by enhancing educational outcomes and by promoting equity in educational opportunities. The authorities should expand the vocational education and training reform and reinforce the professional content of the training programmes.