Defense Budget Forecast
The Polish defense budget grew at a steady rate over the historic period to reach $15.1 billion in 2022. This equated to a positive CAGR of 7.8% between 2018 and 2022. Growth is expected to continue to 2027, with the budget for that year forecast to be $26.0 billion (a positive CAGR of 4.1%). The war in Ukraine is pushing this budgetary growth. Poland, like other members of the Western military community, has committed to increasing its defense spending in response to the Russian invasion of Ukraine, Poland’s neighbor. The budget will have to take a sizeable leap from $15.1 billion in 2022 to $22.2 billion in 2023 (an annual growth rate of 47.1%) if Poland is to fulfill its promise of spending 3% of its GDP on defense by 2023.
Moreover, the conflict has demonstrated the real threat that Russia poses to states in Eastern Europe. An event such as the Ukraine war has been feared for the past decade, but its realization has reinforced the need to invest in conventional technologies such as armored vehicles and fighter aircraft.
As such, the acquisition budget is forecast to grow from $5.6 billion in 2022 to $8.8 billion in 2023, an increase of 58.6%. This trajectory is forecast to continue with $10.6 billion expected to be committed to acquisition spending by 2027. Poland’s division of its budget allocates roughly a third of funds to acquisitions. This proportion is necessary if Poland is to procure the technology necessary to fulfill its strategic goals and maintain a conventional deterrent force.
Drivers of Defense Expenditure
As per GlobalData’s Poland Defense Market 2022-2027 report, the threat of Russia, Poland’s ongoing commitment to international organizations, terrorism and organized crime, and activities in the cyber domain, are key drivers of polish defense spending.
The threat of Russia is without doubt the primary driver of defense expenditure in Poland. A member of the EU and NATO, Poland has historically been one of the strongest detractors of Russian foreign policy, a stance which has taken on new meaning in light of the invasion of Ukraine. The geographic proximity of Poland to Ukraine has demonstrated the importance of creating a strong and capable fighting force that, alongside international allies, could face military action from Russia.
Poland is a key contributor to NATO, with allied forces stationed in the state after the Russia’s invasion of Crimea in 2014. Four battalion sized battle groups form the enhanced forward presence across Poland, Estonia, Lithuania and Latvia. Beyond the deployment of international troops to Poland, the Polish defense expenditure is driven by the need to ensure that the capabilities of the Armed Forces are in line with their international allies.
Poland is highly vulnerable to attacks from both domestic as well as international cyber criminals and hackers. This threat is only increasing due to the increasing ease of which the technological capabilities required to cause mass destruction can be acquired by both state and non-state actors. As such, the growing incidence of hybrid threats drive defense spending in the cyber domain. This is in line with strategic decisions outlined by NATO after the 2016 Warsaw Summit. Defense spending in the cyber domain will be driven by both state and non-state actors and military and non-military threats. It may include cyber defense and cyber security as well as other new dynamic technologies such as remotely controlled weapon systems.
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