The economic impact of COVID-19 led to a reduction of HRK541.7m ($81.9m) between Croatian Defense expenditure plans in 2019* and 2020. However, GlobalData forecasts an increase in spending by 2026, with a focus on developing soldier equipment and small arms. The leading data and analytics company also notes that Croatia’s future priorities lie in strategic defense collaboration, and additional funding is anticipated for defense cooperation agreements.

GlobalData’s latest report, ‘Croatia Defense Market – Attractiveness, Competitive Landscape and Forecasts to 2026’, projects Croatia’s defense spending to grow at a compound annual growth rate (CAGR) of 6.37% to reach $1bn in 2026.

Vera Lin, Associate Aerospace and Defense Analyst at GlobalData, comments: “Croatia’s defense spending is comparatively low, compared with other NATO member states, and has been reduced since the 1990s due to the stabilization of regional security after the Yugoslav War. However, international (NATO) and regional security commitments to modernize its armed forces have been a major driver for defense expenditure increases as the nature of conflict changes towards hybrid warfare tactics involving cyber and electromagnetic warfare capabilities.

“Additionally, the Croatian-US agreement for a military cybersecurity operations centre in Zaghreb last November is a potential template for further funding and other defense cooperation agreements.”

According to the GlobalData ADS Intelligence Center, the 2021 Croatian defense budget has increased from $662.1m in 2017 to $781m in 2021, a 4.21% CAGR over the historic period. Further, budget allocation for acquisitions is anticipated to increase in the forecast period from 2022 to 2026, increasing from $83.5m to $142.4m.

Lin continues: “Since the initiation of Croatia into NATO in 2009, the country has been trying to modernize its military forces and replace obsolete platforms. Croatia is moving from ex-Soviet and ex-Yugoslavia era systems to NATO-compatible platforms. The forecasted increase in acquisition funding aligns with Croatia’s plans of acquiring 12 secondhand platforms of the Rafale fighter jet to replace the ageing MiG-21 aircrafts. The MiG-21 aircrafts are expected to be retired in 2024, with plans of the replacements currently underway.”

GlobalData notes that a driving external factor behind the decision to choose the Rafale was to strengthen strategic political relationships in line with earlier announcements of partnerships through defense cooperation.

Lin adds: “The Croatian Government has continually iterated its commitment to NATO, particularly in its role in stabilizing security in the Western Balkans along with consolidating its position in the EU, with the EU Defence Fund providing financial support. Croatia is also aiming to increase European defense collaboration through research and development initiatives as a project partner.”

* As per plan published 23 December 2019