London, April 29th, 2012 – The annual defense budget of Italy in
2011 stood at US$27.34 billion, inclusive of homeland security, defense function
and other non-essential expenditures of the military. The defense function
budget of Italy’s armed forces recorded a CAGR of -2.41% during the review
period and defense
expenditure as a percentage of GDP averaged at 1.3%. However, in the forecast
period, the country is expected to increase its expenditure in an effort to
increase its defense capability and the defense budget is expected to increase
4.46% to value at 1.1% of GDP, by 2016.
The
Italian government is keen to continue to modernize its military and equip its
forces with the latest technology. Over
the forecast period, government efforts to restore the competency of its forces
lost during the period of lower spending will support the national military
budget. Furthermore, The Italian
government has awarded high priority to the peacekeeping operations of its armed
forces, including UN and NATO missions. Italy is one of the leading contributors
to global peacekeeping operations, and is the sixth largest contributor to the
UN peacekeeping budget.
Defense imports to Italy fell sharply in 2008–2009, as the country
faced high levels of fiscal deficit during these years and, subsequently,
reduced its spending. During the forecast period, defense imports are expected
to decline further, due to economic crisis in Italy and across Europe. This led
to reductions in the defense budgets of many countries, including France, Greece
and Poland, which are some of the top importing countries of Italian defense
products. The cuts will decrease the
procurement expenditure of these countries and have a negative impact on the
order book of the Italian defense industry.
Total
defense expenditure as a percentage of GDP is expected to decrease from an
average of 1.3% during the review period to 1.1% by 2016 due to cuts to the
budget. The defense function budget is also expected to decline from 0.9% of GDP
in 2011 to 0.8% by 2016. Despite this, Italian defense expenditure will continue
to be driven by the modernization program of the armed forces and the country’s
participation in NATO and UN peacekeeping missions.
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