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Portugal's economy has gone through a gradual recovery from a deep recession. A wide-ranging structural reform agenda has supported the recovery and the ongoing reduction of imbalances built up in the past. Raising investment will underpin the ongoing rebalancing of the economy and a stronger export sector. Incentives for new capital investments could be strengthened by improvements in judicial efficiency, administrative reform, product market regulation reforms or lower labour costs. Removing non-performing loans from bank balance sheets would enhance banks' ability to provide new credit to firms. Addressing bottlenecks in insolvency procedures and opening up new sources of financing would also boost private sector investment. Overcoming a legacy of a low skilled labour force is key for higher living standards. Despite remarkable progress, the education system could do more to raise skill levels and reduce the link between learning outcomes and socio-economic backgrounds. The high share of early school drop-outs and frequent use grade repetition could be reduced by shifting resources towards primary education and students at risk and improving teacher training and exposure to best practices. Unifying the current fragmented Vocational Education and Training (Vet) system into one dual Vet system, and strengthening monitoring and evaluation could raise its effectiveness to meet the labour market needs and ability to contribute to a more skilled society. Efforts need to continue to raise the skills levels of the low-qualified adult population.