The Netherlands Defense Budget Is Expected To Reach US$10.77 Billion By 2016

Monday 26 March 2012, Amsterdam

The Netherlands defense expenditure recorded a CAGR of 0.61% during the review period.  During the forecast period, the high fiscal debt of the country, along with the financial constraints of the Ministry of Defense (MOD), is expected to cause the defense budget to decline at a CAGR of 0.16%. The defense budget is primarily driven by peacekeeping operations, assistance for the internal defense forces of the country, and the modernization of the armed forces. The defense budget as a percentage of GDP is expected to decline from an average of 1.45% during review period to 1.11% in 2016.

The defense expenditure of the Netherlands is primarily driven by the country’s participation in various international peacekeeping missions, joint operations with the police force for the internal security of the country and the modernization of the armed forces.  These joint operations and modernization ensures internal stability and supports defense expenditure.

The defense imports of the Netherlands, which recovered in 2009 after falling in 2008 further declined in 2010 by 26%. However, in the forecast period defense imports are expected to increase due to the procurement of armored vehicles and infantry fighting vehicles. 

The defense exports of Netherlands, which also recovered in 2009 after falling in 2008, are expected to remain at 2010 levels during the entire forecast period.  As the majority of defense goods are exported to European countries and many European countries have announced defense budget cuts, exports are expected to be at 2010 levels. Also, Dutch defense companies have not yet penetrated in rapidly growing markets such as India, China and Saudi Arabia.

The Netherlands government has been criticized for giving inadequate support to its domestic defense industry over the review period, especially during times of economic crisis. The government reduced its defense budget, forcing the industry to rely on export orders for revenue. In addition, the government does not offer financial resources such as working capital funds to the industry in order to cater to export orders, which has forced many domestic firms to close. 

The Netherlands government allows 100% FDI in its defense industry without any restrictions or review. In addition, the country does not set limits for companies for the percentage of ownership.  This results in some foreign companies setting up branches and registering their subsidiaries in Netherlands.

During the review period, the defense expenditure of the Netherlands averaged at 1.45% of GDP. However, during the forecast period, the financial challenges faced by the MOD due to the high fiscal deficit of the country will lead to a lower budget allocation for defense.  The defense budget of the Nethelrands, which was estimatred at US$11.78 billion in 2011, recorded a CAGR of 0.61% during the review period. During the forecast period, the defense budget is expected to increase at a CAGR of 0.16% to reach US$10.77 billion by 2016.