Market Trends of Eastern Europe Defense Industry
This section covers the major market trends shaping the Eastern Europe Defense Market according to our research experts:
Vehicles Segment Accounted for a Major Market Share in 2021
In 2021, the vehicles segment dominated the market, owing to the various ongoing upgrade and procurement programs in the region. Currently, most of the investments are being directed toward fleet expansion initiatives. Additionally, fleet modernization plans are underway for many countries, as most of the fleet in the region belonged to the Soviet era. Many countries in the region are members of NATO and have vowed to increase their military spending to 2% of the GDP. Countries, like Poland and Russia, are focusing on increasing the fleet of naval vessels, thereby propelling the growth of the segment. For instance, in August 2021, the Spanish state-owned shipbuilding company Navantia announced that it has been shortlisted to build three frigates in a Technology Transfer (ToT) program for the Polish Navy. On the other hand, the Russian Navy received three new nuclear-powered submarines in 2021. In addition, as of January 2022, 13 nuclear-powered submarines are at different stages of construction in the Russian shipyards and are all expected to be delivered to the navy before 2027. The Russian Navy also plans to build and procure a total of 40 Project 12700 mine countermeasure vessels by 2035. In addition to the naval capabilities, countries are also developing their aerial and terrestrial capabilities for surveillance and combat missions. In April 2022, Hungary announced that it has ordered 12 modern Aero Vodochody L-39NG trainer aircraft. The first aircraft will be delivered in 2024. Such procurements are anticipated to propel the growth of the vehicles segment of the market during the forecast period.
Poland to Show Significant Growth During the Forecast Period
During the forecast period, Poland is expected to show significant growth compared to other countries in the region. Poland's military is continuously undergoing changes, aimed at transforming it into a more capable, modern, and NATO-compatible force. Poland's military spending was USD 13.7 billion in 2021. Poland's spending was 58% higher than in 2012. In October 2021, Poland announced amendments to the country's budget, as the country experienced a better than expected economic situation. The defense expenditure increased by PLN 6.3 billion, or approx. USD 1.6 billion (12.2%) to reach about USD 15 billion. The extra funds would be allocated mainly to modernization efforts pursued by the military. Poland is already spending 2% of GDP on defense and has been planning further increases. In March 2022, the country announced plans to increase the defense spending from the NATO-recommended 2% to 3% in 2023, driven by the Russia-Ukraine war and the perceived Russian threat. The increase in the spending levels will enable the country to increase the size of its armed forces, restore the reserve system, and modernize its equipment. The government is making changes in every area of operation, including training, protection, communications, and weapon systems, and across all types of vehicles. The main elements of the Polish army's modernization plans include the improvement of troop capacity and air defense systems and the development of weaponry and manned and unmanned vehicle strength. In April 2022, Poland signed a deal with MBDA under which the country's military will get a short-range, air-defense system using MBDA's Common Anti-air Modular Missile, or CAMM. Such procurement activities for land, air, and sea platforms will propel the growth of the market in the country during the forecast period.
