Serbia Defence & Security Q1 2018
BMI View: Serbian defence spending will be modest in USD terms in 2018, as the depreciation of the Serbian dinar against the dollar weighs on headline spending. In dinar terms, we forecast robust growth in defence expenditure, as the government moves away from strict fiscal consolidation. Persisting security threats stemming from unresolved disputes with neighbouring countries, separatists and ultra-nationalist groups, combined with Serbia's increasing participation in peacekeeping operations and the need to modernise the SAF all underpin our view for spending to grow at a relatively robust pace. Serbian defence manufacturers, most of which specialise in the ground segment, will, due to the lack of domestic demand for their products, remain export-focused especially towards the Gulf. Although we expect the local defence industry to expand design and production capabilities in cooperation with foreign companies over the next decade, Serbian purchases of technologically advanced equipment such as fighter jets will still need to come from abroad, as such items take years and significant amounts of funding to develop.
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