Productivity growth in Lithuania has slowed in the aftermath of the global financial crisis, holding back income convergence and making it harder to reduce further the relatively high inequality and poverty. A comprehensive approach is required to address productivity and inclusiveness challenges, building on their synergies. The government has taken measures to this end, with the New Social Model at the core, but efforts need to continue. Reforms should focus on additional improvements in the business environment by easing further regulations on the employment of non-EU workers and reducing informality. Initiatives to improve the governance of state-owned enterprises are welcome and need to continue. Improving access to finance and ensuring effective bankruptcy procedures are key to boosting firm dynamism, as are measures to encourage business-research sector collaboration on innovation. Addressing large skills mismatch is also a priority. Increasing the market-relevance of the education system is important. More and better-quality jobs in the formal sector, especially for the low-skilled, are key to inclusiveness and well-being, while more effective support and active labour market programmes would help combating poverty.