Digital technologies can help Portugal to address economic challenges, including low productivity growth and to mitigate the negative impact of the COVID-19 crisis. Despite impressive progress over recent years, especially in the public sector, Portugal lags OECD best performing countries in the use of key digital technologies. Broad-based policies should aim at getting the most out of digitalisation, lifting capabilities and sharpening incentives to adopt new technologies, while limiting the rise in inequalities it might generate. While communication infrastructure is good overall, addressing connectivity bottlenecks, improving affordability, and increasing digital security is key for the digital transformation. Equipping citizens with the skills needed in a digital economy is a pre-requisite to ensure the benefits of digitalisation are widely shared. Investment in knowledge-based capital and ICT equipment needs to be supported in SMEs by developing expertise and diversifying financing sources, while further reducing regulatory and administrative barriers to business growth.