Study: Baltic defense industry growing fast, but long-term success not guaranteed
A LaSER think tank study finds the defense industry in the Baltic states is expanding rapidly, though sustained growth is not assured given fierce competition across Europe. EU defense spending has risen 63% in five years.
The Latvian Institute for Strategic and Economic Solutions (LaSER) has published a study titled "Baltic Defense Industry: United We Stand, Divided We Fall?", examining how the security sector is developing in Latvia, Lithuania and Estonia. Researcher Roberts Kits says Europe is now assigning defense industry the role once envisioned for the green transition five years ago: a sector meant to both rebuild long-neglected military capabilities and drive economic growth. However, he cautions that success is far from guaranteed, since nearly every European country is developing its own defense industry and prioritizing procurement from domestic producers.
Spending up 63%
The study found that defense spending across the EU's 27 member states reached roughly €381 billion in 2025 — a 63% increase compared to five years earlier — now accounting for more than 2% of the EU's GDP. This surge has been driven by Russia's aggression against Ukraine and growing uncertainty over the United States' future military role and presence in Europe. As a result, European countries have been forced to invest far more actively in procurement as well as in defense research and development, restoring capabilities and equipment that had long been neglected while also trying to introduce innovations for the future.
The report notes that the number of conflicts worldwide — including both interstate wars and internal armed clashes — has grown tenfold since the end of World War II, and that the US-led, rules-based liberal world order has ceased to function. For small states, this has made survival — defending sovereignty and protecting territorial integrity — the central question of foreign and security policy.
EU looks to reduce reliance on outside suppliers
Between 2022 and 2023, EU member states directed 78% of all defense procurement spending to suppliers outside the bloc. Amid rising concerns about the reliability of transatlantic ties, the EU has launched a series of policy initiatives and support mechanisms aimed at strengthening its own industrial capacity and better aligning military needs with industrial development.
Regarding the Baltic states specifically, the study notes that Latvia's defense spending will reach nearly 5% of GDP this year, while Lithuania and Estonia will exceed that threshold. According to Kits, this is boosting military capabilities while also fueling the development, production and export of high-value-added products across the Baltic region.
