Dallas, TX -- (ReleaseWire) -- 10/30/2012 -- The Finnish defense budget stood at US$3.60 billion in 2012 and recorded a CAGR of 0.28% during 2008–2012. Finnish defense expenditure is expected to decline at a CAGR of -1.47% in 2013–2017 as a result of the Eurozone crisis and the consequent Economy Management Plan by the government. The high ratio of debt to GDP will lead to a decline in capital expenditure along with the lay-off of defense personnel to control revenue expenses. Military spending is expected to be driven by threats from Russia on the eastern border, the procurement of advanced air defense systems, and participation in international peacekeeping missions.
Finnish defense expenditure is expected to grow significantly during the forecast period (2013-2017), driven by international peacekeeping missions, the acquisition of advanced defense systems, and a perceived security threat from Russia. Currently, over 1000 personnel are participating in nine different operations across the globe, primarily as a part of United Nations (UN), European Union (EU), Organization for Security and Cooperation in Europe (OSCE), and North Atlantic Treaty Organization (NATO) operations. The Finnish armed forces have failed to embark on a defense modernization plan in the past decade, resulting in obsolete hardware. Even though the country has enjoyed peaceful diplomatic relations with Russia since the collapse of the USSR in 1991, it perceives Russia as a potential threat to its security due to pre-1991 violent relations and increased Russian defense expenditure.
The Finnish defense budget deficit in 2011 stood at US$10.6 billion, due to which the country was compelled to reduce its defense budget in the next ten years. Currently, the Ministry of Defense is contemplating reductions of US$300 million in its defense budget for 2012-13, which may eventually lead to the cancellation of defense-related projects and air defense modernization projects. A potential cut to Finland’s defense budget is an area of concern for foreign investors and deters their entry into the nation’s defense sector.
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