According to ELSTAT, Greece’s trade deficit reached over €11 billion in the first four months of 2025. Specifically, the trade balance deficit for January–April 2025 stood at €11.084 billion, compared to €11.050 billion in the same period of 2024 — a 0.3% increase.
Total exports during the same period fell to €15.975 billion from €16.827 billion last year, a drop of 5.1%. Imports also decreased by 2.9%.
What’s Causing the Gap?
Why is this happening? A recent report by Alpha Bank, published Thursday, notes that although exports are rising, imports are growing even faster. But why would that be the case during a period of high growth and strong investment activity? The answer lies in three less obvious but critical factors:
Domestic production cannot meet the rising demand driven by increased consumption and investments.
Many Recovery and Resilience Facility (RRF) projects rely on imported equipment, fueling a surge in imports.
Greece remains heavily dependent on foreign energy—a costly dependency, especially in the wake of the energy crisis.
Is this simply the result of strong domestic demand, with imports outpacing exports as Greece grows faster than its main trading partners in the EU? Or could it also be linked to increased capital equipment imports under the Recovery Fund and inflows of foreign direct investment? Or does it reflect a decline in the global competitiveness of Greek products due to production costs or quality concerns?
The Recovery Fund Factor
It’s clear that investments funded by the Recovery and Resilience Facility require substantial capital goods imports. At the same time, Greece’s strong economic growth and record-breaking tourism are increasing the demand for consumer goods. Maintaining and boosting the competitiveness of the Greek economy is therefore crucial to sustaining export momentum and gradually reducing the external sector deficit in the medium term.
The Energy Cost Problem
From 2022 to 2024, Greece’s average annual imports of goods stood at €87 billion (in current prices), up from about €50 billion during 2010–2021. As a net energy importer, Greece saw a sharp rise in the value of imported goods primarily due to surging energy prices following the outbreak of the war in Ukraine. Although energy costs have eased somewhat (2023: -13.4%, 2024: -1.4%, 2025: -0.4%), they remain well above pre-crisis levels.
The Role of Growth
Greece is currently growing at a faster pace than its main EU trading partners. In Q1 2025, Greece’s real GDP rose by 2.2%, compared to an average of 1.6% in the EU-27. This growth was mainly fueled by private consumption (+1.9%).
Investments have also been steadily increasing in recent years, rising from an average of 12% during the financial crisis to around 15% of GDP. Although total investments declined by 3.2% year-on-year in Q1 2025, investment in machinery and technological equipment rose by 1.7%.
Greece remains highly dependent on imports of both consumer and intermediate goods.
The Impact of the RRF
Investments are being supported by the gradual implementation of Greece’s National Recovery and Resilience Plan. By May 2025, Greece had received €21.3 billion (59% of the total budget). As for the loan component of the plan, by April, 435 loan agreements had been signed, totaling €16.15 billion. Most of these projects focus on renewable energy and energy efficiency (47%) and digital transformation (22%).
Consumption Trends
These developments have fueled a rise in imports of both consumer and capital goods, as domestic production—especially of durable goods and machinery—cannot meet internal demand. This is reflected in the increase in durable goods consumption, driven by rising disposable incomes and consumer credit, which returned to positive growth territory after 2022.
Trade War & Volatility
According to the Bank of Greece (Governor’s Report 2024, released April 2025), global trade protectionism may heighten exchange rate volatility in 2025. Such uncertainty could affect prices, especially for countries like Greece that rely heavily on imports of basic materials and intermediate goods—where substitution is difficult.
The report adds that these impacts will be more pronounced for economies like Greece, where high import dependency leaves limited flexibility. However, Greek labor cost competitiveness is expected to remain stable, as labor costs are projected to rise faster in Greece’s key trading partners.
Source: OT
