By Judith Ugwumadu | 11 August 2014

Europe’s most troubled economies ­– Portugal, Italy, Ireland, Greece and Spain – are ‘heading for a comeback’ and will return to positive growth this year after long recessions, according to the Centre for Economic and Business Research.

However, recovery in these economies will be ‘too slow to heal the deep scars’ of the recession the CEBR said as it published its latest economic forecast on all five of the PIIGS countries.

The group is projected to contribute over a quarter of eurozone’s projected growth of 7.8% between 2014 and 2019, but the CEBR noted that the legacy of the financial crisis in the PIIGS economies would ‘haunt’ them for years to come in the form of high unemployment, reduced productive capacity, reform fatigue and political fragmentation.

It said that economic performance in the PIIGS still remained well below its pre-crisis peak, and the think-tank’s forecast sees it failing to fully recover by 2019, particularly in Greece, Spain, Italy, and Ireland.

Danae Kyriakopoulou, CEBR economist and main author of the report, said: ‘The eurozone’s periphery economies are heading for a dynamic comeback this year, and are forecast to be an important driver of growth for the currency area going forward.

‘However, one should be wary of a premature sense of “mission accomplished”. Gross domestic product per capita still stands well below pre-crisis peaks in the periphery and even in France and the United Kingdom, and is forecast to remain there throughout the forecast period in Spain, Italy, Greece and Ireland, despite strong growth.

‘The PIIGS still have a lot of reforms to undertake and complacency now could be disastrous for their future.’

Vicky Pryce, chief economic adviser at the CEBR, added: ‘The debt overhang, which still plagues many of the PIIGS, will act as a constraint to growth. As a result, a return to pre-crisis levels for the [five] economies such as Greece may take more than a decade to be realised, with huge losses in skills and other productive infrastructure in the meantime.’

Exports and investments from abroad would be the main reasons for economic growth in the PIIGS regions, the think-tank said. It noted that a more gentle global economic backdrop, mostly supported by the recoveries seen in the US and UK but also the rest of the eurozone, could aid strong exports from the PIIGS.

As for foreign investment, the PIIGS made significant economic adjustment in recent years and are in a much better position than when the crisis hit, offering venture opportunities to prospective investors.