Defense Budget Forecast
South Korea’s defense expenditure grew from $38.2 billion in 2018 to $48.3 billion in 2022, reflecting a CAGR of 6% during 2018–22. The growth is primarily attributed to the sudden acceleration in defense spending in 2022, which is valued at $48.3 billion. This is an annual growth rate of 10.5% over the previous year (2021), when the South Korean budget was valued at $43.7 billion. The collapse of the peace process in June 2020 has compelled South Korea to reinforce its defense posture, as it is likely to result in the North Korean regime resuming its hostile stance against South Korea. The country's defense budget is anticipated to increase from $51.9 billion in 2023 to $66.2 billion in 2027, reflecting a robust CAGR of 6.3%. The South Korean acquisition budget is also anticipated to grow from $17 billion in 2023 to $21.6 billion in 2027, reflecting a robust CAGR of 6.2%.
Drivers of Defense Expenditure
As per GlobalData’s South Korea’s Defense Market 2022-2027 (free) report, North Korean militarization, and development of the domestic industry are the primary drivers of South Korea’s defense expenditure.
South Korea has traditionally had an inimical, hostile relationship with North Korea. The country faces a direct threat from the North Korean nuclear program and is continuously targeted by an arsenal of North Korean ballistic missiles. With the failure of the peace process in June 2020, the country is compelled to bolster its defense posture to deter any hostile activity from the North Korean regime.
South Korea's government has announced that it is moving away from its historically import-dependent defense policy to one that supports gradual independence. The country is anticipated to explicitly promote joint cooperation and collaboration initiatives to develop a robust defense industry.
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