The Eastern Europe Defense Market size is estimated at USD 3.93 billion in 2024, and is expected to reach USD 4.76 billion by 2029, growing at a CAGR of greater than 3.91% during the forecast period (2024-2029).
The military expenditure of the region continued to increase, driven by the regional conflicts and the push for modernization. According to SIPRI, the defense spending of the countries in the region totaled USD 181 billion in 2023, an increase of 31% compared to that of 2022 and 118% higher than that of 2014.
Furthermore, the Russian invasion of Ukraine, the most significant armed conflict in the region since the Second World War, is expected to propel the defense spending of the region in the years to come. Countries in the region are going through many military modernization plans, and they are planning to upgrade their armed, naval, and air forces. Such factors may drive the market in the coming years. The growing perceptions of the threat from Russia and calls from the United States to the NATO countries to increase their defense spending will be the growth drivers for the market.
The industry faces challenges due to the high costs of advanced technologies. Developing and deploying cutting-edge systems, including sophisticated sensors, EO/IR systems, and unmanned platforms, involves substantial investments. The high cost poses a barrier for some entities, hindering the adoption and creating a challenge for the industry.
The Eastern Europe Defense market is semi-consolidated. Rostec, BAE Systems plc, THALES, United Shipbuilding Corporation, and Rheinmetall AG are some of the major players in the market. Mergers and acquisitions are increasing as players aim to increase productivity and cut costs. For instance, in June 2022, Rostec merged United Aircraft Corporation (UAC) and the fighter manufacturers Sukhoi and Mikoyan-Gurevich into a single aircraft building center. The optimization is expected to enhance productivity and save the company about USD 1.7 billion.
Local manufacturers are strengthening their presence in the region by increasing their production capabilities and forming joint ventures with foreign players, thereby increasing their competitiveness in the market. Furthermore, players can take advantage of rising opportunities from countries like Poland, Romania, and Bulgaria, as these countries are planning further upgrades of military equipment in the coming years.
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