Greek economic growth is expected to outperform the eurozone this year and next but it will also be burdened with above-average inflation and a large external sector deficit, the European Commission said in its spring economic forecast released yesterday. The forecast predicted the Greek economy expanding by 3.6 percent this year and 3.8 percent in 2004 but cautioned that the estimates «are subject to considerable risks due to international uncertainties.» Brussels’s forecasts are lower than Greece’s more optimistic estimates of 3.8 percent growth this year and 4 percent next year. The Bank of Greece came out with a 3.7 percent forecast last month. The economy expanded by 4 percent last year. Robust domestic demand and investment spending related to the 2004 Olympic Games and fueled by EU funds are seen as driving the Greek economy forward over the next two years, the Commission said. It also held out hope for Greece in the coming years after the Olympic Games and when EU funds taper off in 2006. «The expected improvement in the international environment from 2004 and low interest rates may help in keeping domestic activity buoyant in the period after the end of the Olympics,» the Commission said. In the long term, Greece could benefit as neighboring economies take off. The Commission, however, warned that Greece’s above-average inflation rate could have a dampening effect on private consumption and erode its competitiveness, leading to «sizable and chronic external sector imbalances.» Greek inflation has consistently outpaced the eurozone in recent years due to a combination of robust domestic growth, bad weather and rising energy prices. Headline inflation eased to 4.1 percent in March and EU-harmonized inflation decelerated to 3.9 percent, the National Statistics Service said yesterday. The Commission forecast Greek consumer price inflation averaging out at 3.7 percent this year, which is significantly higher than Greece’s estimate of 3 percent, and declining to 3.5 percent in 2004. The report also questioned Greece’s ability to cut its budget deficit down to 0.9 percent of gross domestic product and public debt to 100 percent this year without more radical steps to trim expenditures. «Deeper-seated spending pressures and the lack of the decisive measures required to tackle, in particular, the problem of some inelastic categories of government expenditures, render the achievement of the adopted targets uncertain,» it warned. It said the deficit is expected to stand at 1.1 percent of GDP this year and to fall to 1 percent in 2004, while the debt-to-GDP ratio is seen at 101 percent this year and as declining to 97 percent the following year.