The German defense budget, which valued US$41.4 bn in 2012, is one of the largest defense budgets globally. Defense expenditure has declined at a CAGR of -0.17% during the review period. German defense budget is expected to marginally decline with a CAGR of -0.72% during the forecast period (2012-2017), to reach an annual expenditure of US$39.5 bn in 2017 (reference graph).
Germany faces threats from neighboring countries and terrorist organizations, which require modernization of their armed forces amid budget reductions. The country’s slow economic growth will continue to pressurize the German government to decrease its military spending during the forecast period. Germany’s total defense expenditure during the forecast period is expected to value US$199.7 bn.
As a result of the European debt crisis and subsequent budget cuts, the German MoD is expected to reduce its expenditure on military aircraft and other arms contracts over the next four years. The German government has suspended compulsory military service and plans to further downsize the civilian and military manpower.