Croatia - Military Spending

	year	GDP	DEFENCE BUDGET (constant prices 2004)	DEFENCE BUDGET (current prices)
Actual [000 000 €]
2001	21.721			654
2002	23.524			618
2003	25.320			642
2004	27.309			587
2005	29.213			547
Long Term Development Plan 2006-2105 Croatian Kuna (HRK)
2005	222.031	1,792%	3.979	4.104
2006	230.913	1,719%	3.969	4.229
2007	240.380	1,753%	4.214	4.636
2008	250.717	1,800%	4.513	5.118
2009	260.996	1,850%	4.828	5.640
2010	271.436	2,000%	5.429	6.532
2011	317.541	2,000%	5.646	6.997
2012	330.243	2,000%	5.872	7.495
2013	282.293	2,000%	6.107	8.029
2014	293.585	2,000%	6.351	8.600
2015	305.328	2,000%	6.605	9.213

Croatia has six weeks to come up with a concrete plan on how to increase its defence budget to 2% of GDP by 2024, Defence Minister Damir Krsticevic said on October 25, 2019 in Brussels. "NATO considers that Croatia has to invest more in equipment and the modernisation of its army. The heads of state of NATO member states are set to meet in London in six weeks' time and NATO considers that Croatia has to come with a concrete plan on how to achieve a defence budget of two percent," said Krsticevic who attended a meeting of NATO defence ministers in Brussels. NATO heads of state agreed at a summit in 2014 in Wales that within a period of ten years, i.e. by 2024, member states need to increase their defence spending to at least 2% of their respective GDP with at least 20% of that going to modernisation and equipment. Donald Trump in particular is insisting that this be met during his term in office. Croatia currently allocates between 1.7 and 1.75% of GDP for defence.

The Croatian Parliament adopts the defence budget as part of the State budget, which is one of the elements of democratic parliamentary control. The Croatian Parliament adopts the National Security Strategy, the Defence Strategy and the CAF Long-term Development Plan. The Government of the Republic of Croatia proposes the defence budget as a part of the state budget. The Government also proposes the National Security Strategy, Defence Strategy and the CAF Long-term Development Plan to Parliament. The Government submits the Annual Report On The Readiness Of The Defence System, Conduct Of Personnel Policy And The Overall State Of The CAF. The Government also adopts the Defence Plan of the Republic of Croatia.

The Defense Budget includes the armed forces; the intelligence and internal security forces are covered by other budget items ("security forces" includes only police; Croatia does not have a gendarmerie or other paramilitary internal armed force). There are some small off-budget receipts (from military-owned businesses, such as hotels and related businesses) which are reportedly audited by MOD internal auditors.

Croatia had an ambitious military reform program in place to make the armed forces "NATO-ready" by 2007 -- a difficult task under the best circumstances thanks to a defense budget burdened by excess personnel and obligatory pension payments to war veterans, leaving only minimal resources for much-needed equipment procurement. Defense reform was an essential pre-condition for Croatia to demonstrate that it will become a net contributor to security through NATO operations. By 2006 defense spending (both in nominal terms and as a percentage of GDP) had declined for three straight years. However, the downward trend was reversed in 2006, with Defense spending rising slightly in nominal terms despite tight budgets, and stood at approximately 1.8% of GDP.

The Long Term Development Plan of the Croatian Armed Forces (CAF) for the period 2006-2105 was adopted in the Croatian Parliament on 07 July 2006. The Croatian Armed Forces Long-Term Development Plan 2006-2015, already approved by the government, details the acquisitions required to substantially modernize the Armed Forces at an expected cost of approximately US$ 4.0 billion. The modernization plans include ongoing and future expected procurements in all 3 major defense sectors: air, land and navy. This plan puts into operation the vision of the Croatian Armed Forces shown in the Strategic Defence Review. For the needs of the main equipping and modernisation projects in the CAF 8.879 billion kuna has been planned over a ten-year-period.

Few expect the government to halt or abandon these initiatives. The major question regards the pace at which they can be conducted due to the current health of the Croatian economy. Continuing economic difficulties could see a number of acquisition programs being postponed into the future in order to save funds.

A prerequisite for attaining the aimed organizational structure, accommodation standards, personnel and unit training as well as rational resource management is regrouping of accommodation and storage capacities as well as modernisation of facilities and infrastructure. For this purpose 1.920 billion kuna has been planned for a ten-year-period.

To ensure capabilities for leadership and command of the Armed Forces in all conditions, it is necessary to provide modern communication-information equipment and resources, and the appropriate capability for maintenance and investment in other operational needs. Modern armed forces are inconceivable without highly motivated professional personnel. This plan foresees adequate resources for their recruitment and professional development.

In order to achieve such demanding development goals a stable level of allocations are necessary for defence needs at an annual level of 2% of the GDP. This will create stability in financing and the possibility to start with multi-year development projects, without which the desired level of capabilities of the Croatian Armed Forces is unable to be achieved.

In the 2006-2015 planning period, the defence budget would directly depend on two factors: the real GDP growth rate and the manner of distribution of the defence budget (portion of the defence budget in the GDP). In the document „Guidelines of Economic and Fiscal Policy for the 2006-2008 Period“, the Ministry of Finance anticipated a realistic GDP growth from 4,0% to 4,3% in 2008 under the assumption that a 4,0% growth rate will be maintained over the following long-term period. The portion of the defence budget in the GDP was established at 1.77% of the GDP for 2006, at 1.75% of the GDP for 2007 and 1.67% of the GDP for 2008. (“Instructions for Development of the State Budget of the Republic of Croatia for the 2006-2008 Period”, dated 4 August 2005). Although after 2008 the portion of defence budget in the GDP was not initially defined, the Long Term Development Plan presupposed its increase toas its maintenance at 2% until 2015.

he calculation of personnel costs is based on several assumptions. From 2006 to 2010, the numerical size will be reduced to 17 600 in the CAF (16 000 active military personnel and 1 600 civil servants) and in the period 2011-2015 the numerical size will be maintained at the level of 2010. The conscript component will be gradually reduced and suspended by 2010 The Croatian parliament passed the Government's 2007 budget on 01 December 2006. The budget was based on projections of continued GDP growth, which the Government expected to rise to 5 percent in 2007 from a projected 4.6 percent this year. Spending levels would be 8.9 percent higher than in 2006, while revenue was projected to grow by 9.1 percent. The 2007 defense budget registered a modest increase over 2006, both in nominal and real terms. The Ministry of Defense is set to receive 4.5 billion kunas (USD 821 million), or about 1.66 percent of projected 2007 GDP. Note: Anticipated repayment of the Russian clearing debt could increase this figure, as well as debt payments not accounted for in the MOD budget line.

The GoC remained on track in 2008 to raise defense spending to 2 percent of GDP by 2010 as set out in the MoD's Long Term Development Plan (LTDP). Defense spending in 2007 was approximately 1.63 percent of GDP (1.96 percent when pension payments are included and fire fighting is excluded, per NATO's formula). Projected figures (without pensions, with fire fighting) for 2008 and 2009 are 1.77 percent and 1.82 respectively.

Reduction of personnel costs is a long-term priority in the LTDP. In 2007, personnel costs were approximately 67 percent of the defense budget -- down from 79 percent in 2003. Military planning guidelines for the coming year call for salary upgrades, improvements to living and working conditions, and increased compensation for deployed troops, so the MoD must stick to its force reduction targets in order to continue decreasing personnel costs.

About 7 percent of the defense budget was available for equipment purchases and modernization in 2007. Under the LTDP, this figure will improve to 32 percent by 2010, with USD 610 million envisaged for equipment for the land forces, USD 474 million for the air force, and USD 185 million for maritime forces. Having completed the tender in 2007 to procure armored personnel carriers for the land forces, the largest procurement priorities remain advanced fighter aircraft and coastal patrol ships. Croatian leaders are committed to this plan, which they believe balances national defense needs and force deployability.

Prior to Croatia's November 2007 elections, some politicians talked of 7% GDP growth for 2008. The projection of 4.5% growth used to prepare the budget is notably less optimistic, but also more realistic given current economic conditions. To its credit, the GoC prepared a budget that anticipates the worsening economic situation but stays within the deficit band it promised and below the 3% of GDP limit required by the European Monetary Union. This kept the country on course to achieving its primary goal: EU accession.

The 2008 budget included 5.4 billion HRK ($1.1 billion) in defense expenditures, a 19.5% increase over 2007. Defense expenditures constitute 4.3% of the budget and are expected to constitute 1.8% of GDP. Using NATO formula, i.e., deducting unallowed expenses for fire-fighting and coast guard, but adding allowed expenses for pension costs, the Croatian defense budget for 2008 is actually 2.2% of GDP. About 70% of the increased funding in 2008 went to operations and maintenance and modernization projects. The other 30% went toward salary increases. According to the Ministry of Defense Budget Department, the ministry would spend 472.2 million HRK ($100.5 million) on procurement and modernization programs in 2008. The state budget also provides the Ministry of Foreign Affairs 4.5 million HRK ($957,000) for NATO-related activities.

By NATO standards of accounting, in the Croatian MOD exceeded NATO's guideline of two percent of GDP. Due to the financial crisis, however, Croatia was forced to cut 100 million USD from its defense budget. These cuts will affect acquisitions not currently in the pipeline and training not directly tied to deployments. The Croatian government is looking anxiously at the year's tourist season which provides up to 20 percent of GDP in hopes that it held the seeds of recovery.

Long Term Development Plan
ARMY 240-270 armored 8x8 vehicles 380 Light Multi role Vehicles 18 155mm Self Propelled Howitzers 550 5-ton army trucks, 200 7.5-ton military trucks and 300 4WD vehicles. Modernization of M-84A and M-84A4 Snajper MBTs Upgrades to M-84D and M-95 Degman standard Introduction of new 5.56mm NATO standard Assault rifle Communication equipment, night vision capability, electronic sensors, NBC equipment, battlefield management systems and modernization of artillery systems with new sights and electronic fire control systems.	AIR FORCE 10-12 Multirole fighters 10-14 Mi-171Sh transport helicopters with NATO standards western avionics. 8 Zlin 242L basic trainers. Advanced short to medium range NATO SAM systems Modern Radar network 2 additional Canadair CL-415 fire bombers and 5 Air Tractor Helicopters Medium transport aircraft	NAVY 2 Helsinki class - fast attack craft. 9-12 new patrol boats, locally built, 35-45 meters in length 4 new corvettes - 80-120 meters in length. 2 Göteborg class corvette Modernization of existing 2 King class fast attack crafts. Korcula class mine hunters and additional support ships. Upgrading RBS-15 Missiles to latest standard.