Modernization initiatives to spur Vietnam defense budget at 5.6% CAGR over 2025-29, forecasts GlobalData

Vietnam’s volatile relationship with China and territorial disputes in the South China Sea have compelled the country to enhance its military capabilities.

With China’s growing military might and assertiveness in the region, Vietnam is undertaking modernization initiatives for its armed forces, which will increase its defense budget to an estimated $10.2 billion by 2029, with a compounded annual growth rate (CAGR) of 5.6%, according to GlobalData, a leading data and analytics company.

GlobalData’s latest report, “Vietnam’s Defense Market Size and Trends, Budget Allocation, Regulations, Key Acquisitions, Competitive Landscape and Forecast, 2024-29,” reveals that the country’s defense acquisition budget witnessed a robust CAGR of 12.6% from 2020 to 2024 and is expected to maintain a positive CAGR of 9.4% with a cumulative investment of $14.1 billion during the forecast period, 2025-29..

Akash Pratim Debbarma, Aerospace & Defense Analyst at GlobalData, comments: “Ever since the Vietnam-China war of 1979, the relationship between the two countries has always remained strained owing to China’s continuous intrusions in territories of the South China Sea that Vietnam perceives as its own and considers it a threat to its sovereignty. Even though Vietnam and China agreed to step up cooperation on security matters in December last year, it is unlikely to have any significant improvement in their relationship in the near-term.”

As Vietnam charts its path towards modernization, a significant emphasis lies on bolstering its artillery systems, missile defense systems, and military fixed-wing aircraft capabilities. As per GlobalData estimates, the country is expected to cumulatively allocate $689 million between 2023 and 2028 for procuring various categories of artillery systems.

Also, if the planned procurement of 12 units of Su-57 from Russia materializes in the coming years, it will drastically improve the country’s aerial combat capabilities. Vietnam operates a fleet of Su-27 and Su-30 multi-role aircraft. As the fleet of Su-27s approaches retirement, the inclusion of these Su-57s will surely fulfill the country’s desire to modernize its Air Force inventory.

Debbarma concludes: “In terms of military capabilities and defense investment, Vietnam is one of the fastest-growing countries in the Southeast Asian region, along with Malaysia and Indonesia. As most Southeast Asian countries continue to invest more in their defense budgets to make themselves stronger in order to protect their territory and maintain sovereignty, Vietnam, with an expected cumulative defense budget of $46 billion between 2025 and 2029, displays its intent to modernize its defense capabilities to deter hostile forces in the region.”

 

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