Poland and the Baltic states have finalized budget plans for 2027 that push national defense spending toward 5% of gross domestic product.
What 2027 Budget Drafts Reveal in Poland and the Baltic States
State budget plans adopted for 2027 across Warsaw, Tallinn, Vilnius, and Riga place military spending at or near the 5% threshold, compressing national finances a full decade ahead of the 2035 target set by NATO. Poland’s government adopted its final 2027 budget draft on September 29, allocating PLN198.1bn (€45.3bn) to defense, which amounts to 4.51% of GDP, inside a central government deficit capped at PLN281.2bn. Estonia’s administration approved its own draft a day earlier, designating €2.2bn to keep military outlays above 5% with a deficit of 4%, while postponing the main line of Rail Baltica to 2034 to save money.
At the same time, Latvia has pledged substantial outlays for defense, though Kulbergs pointed out during the Riga Conference Business Forum that a significant share of Latvian funds flows to producers located in France, Germany, Sweden and Finland, remarking: We spend the most, we invest the most, and at the same time we suffer the most.
“According to European rules, we are allowed to have a 4.5 percent deficit, because defense spending is higher. In order to bring it to four percent and reduce the future debt burden and its growth, we had to leave another 250 million euros unspent.”
Kristen Michal, Estonian Prime Minister
How Poland’s Defense Rebuilding Transforms Local Industry and Manufacturing
North of Warsaw along the Vistula river, camouflaged missile launchers roll through the quiet village of Czosnów, heading to a hi-tech weapons facility opened this month that had been a cornfield as recently as two years ago. Last year, total output exceeded $1tn (£755bn), while Poland ranked among the fastest-expanding economies in the EU with a second-quarter annualized growth rate of 3.9% despite international headwinds.
Jim Price, the managing director of MBDA Polska, the local subsidiary of the European multinational arms group, noted the urgency driving local operations amid Europe’s response to Russian aggression and US disengagement:Everyone has had to move twice as fast to meet the Polish needs.
Attention in Warsaw is clearly focused on the risk of an imminent Russian test of NATO resolve, prompting companies to demonstrate technical talent and build growing enterprises in Poland.
Why Credit Rating Agencies and Economists Warn of Fiscal Strain
The defense surge carries heavy economic costs. The overall budget deficit for Poland is anticipated to reach 7.1% of GDP for a second consecutive year, driven in part by EU accounting regulations that record major military equipment deliveries upon arrival rather than at the time of payment. On September 18, Moody’s cut Poland’s rating to A3 from A2, forecasting government debt rising to 68.9% of GDP in 2027 from 59.7% in 2025. Andrzej Domanski, Poland’s Minister of Finance and Economy, stated to Bloomberg on September 29 that there was no space for “gifts” that might boost expenditures during an election year, and cautioned that public liabilities could surpass the legal limit of 55% of GDP by 2028.
However, Poland’s defence boom is not cost-free, and domestic political divisions have emerged for the first time over the benefits of membership in the EU and NATO, as seen in events organized by rightwing politicians opposed to the EU and its support for Ukraine.
“This path is not sustainable. You should ask people if Poland can maintain its growth story and whether politicians will be ready to adjust?”
Leszek Kąsek, Warsaw-based economist at ING Bank
What NATO Defence Investment Figures and SIPRI Data Show Across Europe
NATO defense investment figures highlight how sharply frontline burdens have shifted, with Poland spending $53bn (£39.8bn) in cash terms—the fourth-highest in the EU after Germany, France, and Italy.
| Country | 2014 Core Defense (%) | 2022 Level (%) | Recent Defense Outlay Estimates (%) |
|---|---|---|---|
| Lithuania | 0.88% | 2.1-2.5% | 5.33% (2026 estimate) |
| Estonia | 1.90% | 2.1-2.5% | 5.10% (2026 estimate) |
| Latvia | 0.97% | 2.1-2.5% | 4.92% (2026 estimate) |
| Poland | 1.86% | 2.1-2.5% | 4.68% (2026 estimate) |