BRUSSELS--Greece's reform efforts in the wake of its mammoth bailout still face important hurdles despite a string of wins for the government in Athens, the European Commission said in a review of Greece's performance, Friday.

Dismantling vested interests and swiftly stemming the rising tide of bad loans on Greek banks' balance sheets are key sources of trouble for the slowly recovering Greek economy, the commission said.

In a review of how Greece is faring under its EUR240 billion bailout, funded by the euro area and the International Monetary Fund, the European Union executive said the Greek economy was set to grow by 0.6% this year, a further 2.9% in 2015 and 3.7% in 2016.

Greece has lost about a quarter of its economic output over the last six years, but the review said it looks as if the economy has now bottomed out.

The review said an important landmark for the Greek bailout--the achievement of a primary budget surplus in 2013--had been partly reached by significant underspending on social welfare and the early absorption of EU support funding. Very little of that will be carried over in 2014 and beyond, it noted, as Greece will seek to hit bigger primary-surplus targets set by its creditors.

The Greek bank-recapitalization fund still has some EUR11 billion which should be preserved in case the banks need extra cash to cope with nonperforming loans, which rose to 33.1% in 2013.

Greek banks have been tapping capital markets to raise funds in recent weeks following a report by the Greek central bank in March that said they needed EUR6.4 billion in extra capital.

"The Bank of Greece should remain vigilant in its oversight of the banking system and proceed forcefully in requiring banks to quickly work out their large stock of impaired assets," the report said.

Greece is set to soon start talks with its bailout creditors to get debt relief--a promise they made to the country on the condition that it would continue to stick to its economic program and build a primary surplus.

Without any additional measures to ease that debt burden, which reached 177% of economic output in 2013-2014 according to the commission's report, debt will decline to 125% of gross domestic product in 2020 and 112% of GDP in 2022. That would be slightly higher than the targets set by Greece's creditors at the behest of the IMF. A discussion on the debt relief question is set to take place in the second half of this year.

The country's bailout program needs to be supplemented by an extra EUR2 billion through to the end of August, the experts said--part of a total EUR5.5 billion gap until May 2015. But they noted that they had identified a number of things Greece can do to plug that gap.

The publication of this review is the final step before the euro zone bailout fund can disburse a long-held EUR6.3 billion tranche which has already been cleared by euro-zone finance ministers. The payment of the loan tranche is expected on April 28, a euro-zone official said. Two more tranches, of EUR1 billion each, will follow in June and July.

Viktoria Dendrinou contributed to this article

Write to Matina Stevis at matina.stevis@wsj.com

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