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Hungary Defence and Security Report 2012

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.
Executive Summary

SWOT Analysis
Hungary Defence Industry SWOT
Political SWOT
Economic SWOT
Business Environment SWOT

Global Political Outlook
Eurozone At Centre-Stage, MENA Still A Major Risk
Global Hotspots: Eurozone, MENA, Afghanistan And Korea
Table: Election Timetable, Q4 2011-Q4 2012
United States: Stalemate To Persist, Heading Into Election Season
Latin America: Much More Uncertainty To Come
Western Europe: Incumbent Leaders Under Pressure
Central, Eastern And South-Eastern Europe
Russia And The Former Soviet Union: The ‘Return’ Of Putin
Middle East And North Africa: Can Democracy Take Root?
Sub-Saharan Africa: Testing Times
Asia: All Eyes On China’s Moves
Wild Cards To Watch
Europe Security Overview
Political Risk Analysis - The Strategic Outlook For The 2010s
Europe In A Global Context
Europe’s Key Security Issues Over The Coming Decade

Security Risk Analysis
BMI’s Security Ratings
Table: Europe Security Risk Ratings
Table: Europe State Terrorism Vulnerability To Terrorism Index
City Terrorism Rating
Table: BMI’s Central And Eastern Europe And Central Asia City Terrorism Index
Security Overview
Internal Security Situation
Latest Developments
External Security Situation
Latest Developments
Armed Forces And Government Spending
Armed Forces
Defence Reform
International Deployments
Table: Hungary’s Foreign Deployments
Coordination And Joint Operations
Weapons Of Mass Destruction

Market Structure
Industry Trends And Developments
Table: Key Players In Hungary’s Defence Industry
Procurement Trends And Developments
Latest Developments
Industry Forecast Scenario
Armed Forces
Table: Hungary’s Armed Forces, 2009-2016 (‘000 personnel, unless otherwise stated)
Table: Hungary’s Man Power Available For Military Service (aged 16-49), 2001-2008
Table: Defence Expenditure, 2009-2016
Table: Expenditure Scenario: Changing % Of GDP, 2009-2016
Table: Exports, 2009-2016
Table: Imports, 2009-2016
Table: Trade Balance, 2009-2016

Macroeconomic Outlook
Table: Hungary - Economic Activity, 2008-2015

Company Profiles
Danubian Aircraft Co
FÉG-Army Arms Manufacturing Ltd

BMI Methodology
How We Generate Our Industry Forecasts
Defence Industry
City Terrorism Rating
Table: Methodology
Companies Mentioned
- Danubian Aircraft Co
- FÉG-Army Arms Manufacturing Ltd
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