The Portugal’s Defense Market Will Reach US$1.3B by 2016

Thursday 5 April 2012, Amsterdam

Portugal’s defense budget stood at US$3.27 billion in 2011, lower than that of most large European countries such as Germany, France, UK and Spain. During the review period Portugal had been increasing its defense budget at a robust pace, greater than most other large European defense spenders. During the forecast period, due to the European debt crisis, Portugal’s defense budget is expected to increase at a CAGR of 1.9% to reach US$1.3 billion by 2016 as compared to an increase of 7.02% during the review period.

Military modernization plans and its participation in peacekeeping missions are the primary forces driving Portugal‘s defense budget, the majority of which is spent on revenue expenditure such as the salaries and pensions of armed personnel and operational and maintenance costs. Capital expenditure, which includes expenditure for equipment procurement, constituted an average of 17.51% of the defense budget during the review period and is expected to decrease to an average of 16.9% during the forecast period.

The reduction in troop numbers is expected to bring down the allocation for land forces from an average of 33.9% during the review period to 30% during the forecast period. The allocation for the navy is expected to decline marginally from an average of 26.1% during the review period to an average of 26% during the forecast period, while the allocation for the air force is expected to decline from an average of 20% during the review period to an average of 19% during the forecast period.

Homeland security expenditure is primarily driven by illegal immigration, cyber-attacks and threats of terrorism. The government is expected to procure laptop computers, vehicles, biometric systems and other advanced technology systems for the country‘s internal security forces.

Portugal imports the majority of its defense equipment as its domestic defense industry is relatively under-developed. Ships, aircraft and armored vehicles account for the largest expenditure and the country‘s defense imports increased in 2010 with the procurement of frigates and patrol vehicles. The country‘s main arms suppliers are Germany and the Netherlands and Germany is expected to become a key supplier over the forecast period. Submarines, armored vehicles and frigates are expected to be imported from the European countries