Newly released market study: Romania Defence & Security Report 2016

We expect Romania ' s defence budget to increase , both in absolute terms and as a share of GDP , in the next five years. This growth will be driven by the rising tensions in the Black Sea region, as Russia ' s increasingly aggressive stance in Ukraine and Moldova is prompting Romania to speed up the process of modernisation of its armed forces. M odernisation will initially focus on new equipment and strengthening of capabilities for the army; creating opportunities for local suppliers, which manufacture a range of equipment in the ground segment. Over the longer term, we expect to see procurement of more technologically advanced equipment in other segments, such as aircraft, which will allow foreign companies to capture a greater share of the market.

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Latest Developments

Russia's aggressive stance on Ukraine, as well as its position on the Moldovan breakaway region of Transnistria, are raising security concerns in Romania. This situation, coupled with Bucharest's recent pledge to strengthen the capabilities of Romania's armed forces, will drive an increase in the country's defence spending over the coming years. We expect Romanian defence expenditure to rise to USD2.9bn in 2016. This will bring the defence budget back to pre-financial crisis levels, representing a 1.8% share of GDP (compared to 1.5% in 2015).

Amid increasing regional tensions, the Romanian defence minister announced in July 2015 that the government is considering reinstating conscription. This would follow a trend that has been emerging in the wider region (Lithuania and the Czech Republic have announced they will reinstate conscription). The proposal suggests an introduction of voluntary military internships that would last for a period of six months, in a move to encourage Romanian youth to join the armed forces.

On November 17 2015 , Airbus Helicopters Romania broke ground on its new factory in Brasov, which will be hosting the production of the H215 helicopter, from procurement stage to design and after-sales. The H215 is a new and improved version of the AS332 C1e/L1e model. The first helicopter produced in this factory is scheduled for completion in 2017.

On December 9 2015, UK Prime Minister David Cameron made his first official visit to Romania. During this visit, Cameron discussed with Romanian President Klaus Iohannis the potential for the two countries to strengthen their strategic partnership in the field of defence and security through military cooperation.

Hungary's threat to build a fence along its border with Romania amid the migrant crisis has sparked tension between the two states in recent months. That said, with both countries NATO and EU members, we expect this tension to result in a cooling of bilateral relations, rather than armed conflict.

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