London, June 13th, 2012 – Austrian defense expenditure, estimated to be US$2.73 billion in 2012, declined at a CAGR of -1.04% during the review period. On a cumulative basis, the country is expected to spend an estimated US$12.46 billion on its armed forces during the forecast period. The country’s overall defense spending, however, is anticipated to register a CAGR of -2.25% during the forecast period and to value US$2.49 billion by 2016. The Austrian defense budget is likely to reduce due to the budget cuts associated with the ongoing financial crisis faced by the country (see graph below).
The Austrian economy has just begun to recover from the 2008 recession with a growth rate of 6.3% in 2011. The pace of recovery is, however, expected to be slow. To counter the mounting deficit and increasing public debt, the government is cutting back spending, including defense. This is expected to adversely affect military procurement expenditure over the next five years, and the domestic industry, which is mostly dependent on government procurement, will be severely affected.
The recession, combined with decreasing threat levels from external sources, has made the Austrian government refocus its defense procurement strategy. In December 2010, it announced a massive sell-off plan of its heavy equipment armory, and according to the country’s Defense Ministry, this is a direct consequence of the peace efforts propagated by the European Union (EU) region bordering Austria.
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