Defense Budget Forecast
Taiwan has been compelled to invest in developing a robust defense posture. Taiwanese defense expenditure, inclusive of the additional special budget, increased from $10.7 billion in 2018 to $16.9 billion in 2022, reflecting a CAGR of 12.0% during 2018–22. The continuous annual increase in defense budget during 2018–22 is attributed to the immense threat posed by its neighboring rival China. However, Taiwan's defense expenditure is projected to grow at a CAGR of 3.0% to value $18.1 billion by 2027, mainly due to the People's Republic of China's (PRC) assertiveness with regards to the 'One China Policy’.
The additional budget is expected to continue till 2026 and then we might see a steep decline in budget growth. The acquisition budget stands at $2.2 billion in 2022 and registered a robust CAGR of 40.8% during 2018–22, while it is projected to see a CAGR of -9.6% over 2023–27 to reach $1.8 billion by 2027.
Drivers of Defense Expenditure
As per GlobalData’s Taiwan Defense Market 2022-2027 report, significant military modernization of the armed forces, the aggravation of the dispute between China and Taiwan, and the rapid military modernization of China are the primary drivers of Taiwan’s defense expenditure.
The rapid modernization of the Chinese People's Liberation Army and Taiwan's obsolete equipment have forced the Taiwanese government to enhance its defense capabilities and develop a robust defense industry. While deals focusing on the upgrade of its F-16A and F-16B fighters have garnered attention, the country is also focusing on naval capabilities. For instance, in 2016, the Taiwanese government announced 12 new shipbuilding and force modernization programs, with an estimated value of $14.7 billion.
Focused on countering China’s policy of “One China Policy” where China persistently claims Taiwan as its own territory and has threatened to take it back by force if Taiwan takes steps to formalize its de-facto independence. Tensions between the People's Republic of China (PRC) and Taiwan have increased since the Pro-independence Democratic Progressive Party came to power in 2016 and Tsai Ing-wen became president of Taiwan. During recent months, China has been conducting almost daily military flights over the waters between Taiwan's southern part and the Taiwan-controlled Pratas Islands in the South China Sea. Claiming Taiwan as its own territory, China has stepped up many military activities near Taiwan.
Access the report here.
Taiwan
United States of America
Taiwan
United States of America
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