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Hungary Defence and Security Report 2012
Business Monitor International, Nov 2011, Pages: 81
Business Monitor International's Hungary Defence and Security Report provides industry professionals and strategists, corporate analysts, defence and security associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Hungary's defence and security industry.
In 2011, BMI foresees defence expenditure will stand at 1.22% of GDP, a figure which is seen being the high point of spending for some time. It should be noted that this is significantly less than the 2% which is theoretically required of all NATO members.
Any growth in military spending should therefore be viewed as a NATO-led imperative to modernise ailing weapons systems, but this process has been significantly limited by global and local economic circumstances. Defence spending is certainly identifiable as a preference, rather than a priority, with senior members of the Defence Department suggesting that procurement will be defined by fluctuations in the economy, with no programmes spared from scrutiny. For instance, the upgrade programme for helicopters in the foreseeable future is dependent on resources coming from other countries and NATO itself.
There will be growth in CEE in the coming years, an industry report suggested in October 2011, but most of it is not coming not from Hungary, but mainly from Poland and Ukraine. This is not only due to shortfalls in finances, but also from a consistent lack of foresight in procurement planning. Also, a lack of likelihood of any variety of domestic threat to Hungary is small – and therefore the military is being designed for international deployment. Hungary has somewhat become famous for being a stalwart ally for these deployments in the recent past, however.
Added to this, the possibility of a law which would cap the repayments of loans owed by Hungarian banks in foreign currency has caused discussion of a Moody’s downgrade of several banks in Hungary. This demonstrates the inevitability of Hungary being included in the ongoing European sovereign debt crisis. This will certainly be the backdrop for any procurement within Hungary or indeed, all of Europe, for the foreseeable future.
BMI therefore believes that defence expenditure will flatline at 1.2% of GDP, where it stands today, for the rest of the decade. BMI also sees declines in constant dollar value of the defence budget over 2013 and 2014. This will see the percentage of government spending on defence fall to about 2.29% by 2016, and 2.24% by 2020. This will represent a fall in defence spend per capita from US$211 to around US$206 in 2020. Any recovery of defence expenditure towards the end of the forecast period is highly dependent upon the political will to persevere with the necessary effort to modernise and expand the armed forces. Political turmoil, as well as lower than expected GDP growth, could restrict Hungary’s ability to pay for the modernisation process over the medium term.
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