Analysis of Defense Budget Allocation
During 2017–2020, total Ukrainian defense expenditure as a percentage of GDP averaged 2.7% and is anticipated to increase during the forecast period to reach 3.8%. Over the forecast period, Ukrainian defense expenditure is forecast to grow at a CAGR of 10.05% compared to the estimated GDP growth rate of 0.87%.
The increase in defense expenditure as a percentage of GDP is due to the country’s continuous procurement and modernization of its military equipment. Throughout the forecast period, the country is expected to invest in the acquisition of attack helicopters, fighter aircraft, ammunition, missiles, and missile defense system.
The country’s per capita defense expenditure increased from US$57.9 in 2017 to US$96.2 in 2021 and recorded a CAGR of 13.54% during the historic period. The country’s population is expected to decrease at a CAGR of -0.62% over the forecast period, and overall defense expenditure is estimated to grow at a CAGR of 10.74%.
As the growth of defense expenditure is high compared to the expected rate of increase in population the per capita defense expenditure is estimated to register a CAGR of 10.74%, increasing from US$99.2 in 2022 to US$149.3 by 2026. Despite the contraction of the economy in 2020 due to the COVID-19 pandemic and oil shocks the defense budget as a percentage of GDP and defense budget per capita is still expected to increase due to the armed forces modernization program.
Drivers of Defense Expenditure
Significant Military Modernization of Ukrainian Armed Forces: Ukraine has started emphasizing the modernization of the armed forces due to the conflict with Russia. The capability expansion of the country’s armed forces is the priority of Ukraine and in order to achieve this Ukraine has signed the following major deals:
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