London, April 29th, 2012 – The annual defense budget of Italy in 2011 stood at US$27.34
billion, inclusive of homeland security, defense function and other
non-essential expenditures of the military. The defense function budget of
Italy’s armed forces recorded a CAGR of -2.41% during the review period and defense expenditure as a percentage
of GDP averaged at 1.3%. However, in the forecast period, the country is
expected to increase its expenditure in an effort to increase its defense
capability and the defense budget is expected to increase 4.46% to value at 1.1% of GDP, by 2016.
The Italian government is keen to continue to modernize its
military and equip its forces with the latest technology. Over the forecast period, government efforts
to restore the competency of its forces lost during the period of lower
spending will support the national military budget. Furthermore, The Italian government has
awarded high priority to the peacekeeping operations of its armed forces,
including UN and NATO missions. Italy is one of the leading contributors to
global peacekeeping operations, and is the sixth largest contributor to the UN
peacekeeping budget.
Defense imports to Italy fell sharply in 2008–2009,
as the country faced high levels of fiscal deficit during these years and,
subsequently, reduced its spending. During the forecast period, defense imports
are expected to decline further, due to economic crisis in Italy and across
Europe. This led to reductions in the defense budgets of many countries,
including France, Greece and Poland, which are some of the top importing
countries of Italian defense products.
The cuts will decrease the procurement expenditure of these countries
and have a negative impact on the order book of the Italian defense industry.
Total
defense expenditure as a percentage of GDP is expected to decrease from an
average of 1.3% during the review period to 1.1% by 2016 due to cuts to the
budget. The defense function budget is also expected to decline from 0.9% of
GDP in 2011 to 0.8% by 2016. Despite this, Italian defense expenditure will
continue to be driven by the modernization program of the armed forces and the
country’s participation in NATO and UN peacekeeping missions.
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