Italy’s Annual Defense Expenditure to Reach US$26.8 bn by 2017

Tuesday 25 September 2012, Amsterdam

The annual defense budgetof Italy in 2012 stood at US$25.6 bn, which is inclusive of homelandsecurity, defense function, and other expenditures of the military. The defensefunction budget of Italy’s armed forces stood at US$17.5 bn in 2012,recording a CAGR of -6.32% during the review period (2008-2012). However, thisis expected to register a CAGR of -0.25% during the forecast period(2013-2017), to reach US$18.5 bn by 2017. The total defense budget ofItaly is expected to record a CAGR of -0.03%, to reach US$26.8 bn by 2017 (reference graph).

The economic crisis in Italy and across Europe has led to reductions inthe defense budgets of many countries, including France, Greece, and Poland,which are some of the top importing countries of Italian defense products. Thecuts will decrease the procurement expenditure of these countries and have anegative impact on the order book of the Italian defense industry.

As a member of the EU, the Italian government has a policy to givepriority to European-manufactured defense goods, which makes it more difficultfor non-European defense companies to supply to the Italian defense market. Thehigh capability of, and the prohibition of foreign direct investment in, thedefense industry further reduces the scope for non-European defense companies.Moreover, the participation of the domestic defense industry in internationaldevelopment programs helps the domestic defense industry to acquire advancedtechnologies, which further narrows the opportunities for foreign firms keen toenter the market through technology transfers.