The Czech defense expenditure declined at a CAGR of -3.88% during the review period to US$2.41 bn in 2011. The country’s military expenditure is estimated to register a CAGR of 1.33% during the forecast period, to value US$2.54 bn in 2016. Defense expenditure is expected to be driven by factors such as international peacekeeping operations and counter-terrorism amid budget cuts by the government. As a result of a decrease in overall defense expenditure, the country’s defense budget as a percentage of GDP is also expected to decline from 1.1% in 2011 to 0.9% in 2016 (reference see graph).
Czech Republic is expected to invest US$12.29 bn in its armed forces, of which expenditure on the acquisition of military hardware is forecast to be just US$1.77 bn, offering foreign OEMs limited opportunities to cater to the Czech defense industry. Furthermore, with a defense budget of US$2.4 bn, the Czech Republic invests a relatively small portion of its GDP towards defense in comparison with other European countries such as the UK and France.
Incidents of malpractice within the country’s military industrial base may limit the growth of the country’s defense sector. Recent cases of corruption and bribes in defense deals such as the Pandur contract, leasing of Gripen fighters, and CASA aircraft deals prove the high corruption level in Czech Republic. In addition to damaging the country’s image in the global arms market, it also discourages foreign OEMs from market entry.
As a result of a lack of domestic defense capabilities, Czech Republic is dependent on foreign suppliers to meet its military requirements. The country’s defense exports declined during the review period, dropping to a mere US$11 m in 2011, due to limited categories for export such as aircraft, armored vehicles and artillery.
Source: ASDReports - Market Research
Date: May 30, 2012