The Finnish defense budget stood at US$3.93 bn in 2011 and registered a CAGR of 6.44% during the review period. Growth has since halted due to the Eurozone crisis affecting Finland. In 2012 the defense budget is estimated at US$3.87 bn, and is expected to decline at a CAGR of -1.53% during the forecast period, dropping to US$3.64 bn by 2016. The projected decline in defense expenditure is part of the ‘Economy Management Plan’ by the Finnish government with the intention of preventing the economy from being further affected by the recession (reference see graph).
Finland has been perceived as a country with low levels of corruption. However, since 2006, three alleged instances of bribery and corruption involving the country’s defense sector have been highlighted. As a result, the country’s ranking in the Transparency International Corruption Perceptions Index has been dropping since 2007. Domestic defense industry officials are accused of handing out bribes to foreign public officials in order to win a contract for the supply of 126 armored personnel carriers to Croatia.
The Finnish defense budget deficit in 2011 stood at US$10.6 bn, due to which the country may be compelled to reduce its defense budget in the next ten years. Currently, the Ministry of Defense is contemplating reductions of US$300 m in its defense budget for 2012-13, which may eventually lead to the cancellation of defense-related projects and air defense modernization projects. A potential cut to Finland’s defense budget is an area of concern for foreign investors.
Source: ASDReports - Market Research
Date: Jun 29, 2012