Boston, MA -- (SBWIRE) -- 01/30/2014 -- Italian defence expenditure is expected to experience a significant decline over the coming four years. BMI predicts that the value of Italian defence expenditure will fall to US$32.3bn in 2014, from a total of US $35.4bn for 2013. This downward trend is likely to continue until 2017. BMI believes the budget will remain at about US$31.9bn for the years 2015 and 2016, before gaining slightly to US$32.7bn by the end of the forecast period in 2017.

Italy is one of several southern European countires which are struggling to maintain their defence spending levels at NATO's targeting goal of 2% of gross domestic product. The financial crisis which has gripped Italy, along with Greece, Spain and Portugal, is raising questions as to the extent that these countries can continue to meet NATO's target goal. Some voices in European defence are now beginning to question whether such a target is indeed relevant or even feasible given the current financial downturn being experienced in Europe.

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Traditionally, Italian defence companies have performed well in the international arms market. The country remains one of the world's largest exporters of defence equipment, a position that is unlikely to change in the coming years despite the competition that Italian firms increasingly face from manufacturers elsewhere in Europe and North America, as well as from emerging markets such as Latin America, Israel, Russia and China. Italy also imports a significant quantity of defence equipment sourced from the United States and other European suppliers. It is expected to continue this trend in coming years. Nevertheless, because of the pressure on the country's defence budget caused by the overall economic situation gripping the country, the size and the value of these imports could significantly diminish in the future in a bid to save money.

In late November 2013 it was reported that the Italian government would sell a 40% stake in Fancantieri as part of an effort to reduce the country's public debt by US$16.1bn. Currently, 99% of the firm is owned by the Italian government.

AgustaWestland is on track to win a contract worth US$1.3bn to convert several AW101 helicopters flown by the UK armed forces to a maritime support to operate with the Royal Navy. Other work from the UK MoD won by AgustaWestland includes a GBP439mn deal of maintain, repair and overhaul AH-64 Apache attack helicopters operated by the British Army. Furthermore, the firm is in the running for a contract worth around US$1.1bn to supply Norway with up to 22 AW101s.

In terms of security issues, on 3 October 2013 a boat carrying hundreds of migrants from Eritrea, Ghana, Libya and Somalia sank less than one quarter of a mile from the island of Lampedusa, with the loss of 360 lives.

As regards procurement activity during Q414, the Italian Ministry of Defence has given the go-ahead for the following programme:

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