Poland and Baltics Target 5% GDP Defense Spending by 2027

Poland and the Baltic states of Estonia, Lithuania, and Latvia are budgeting to push their national defence spending to approximately 5% of gross domestic product by 2027, according to regional defence ministries and intelligence reporting. The four frontline states are hitting spending targets a decade ahead of a broader alliance schedule while diverging sharply from the rest of the eastern flank, which is only clearing an older 2% benchmark.

Poland Adopts Final 2027 Budget Draft With 4.51% Defence Allocation

Poland’s government adopted its final 2027 budget draft on September 29, dedicating PLN198.1bn—equivalent to €45.3bn or 4.51% of GDP—to military expenditures, intellinews.com reported. The allocation anchors a central government deficit capped at PLN281.2bn, with the general government shortfall projected at 7.1% of GDP for a second year under EU accounting rules that book record military hardware deliveries upon arrival rather than payment.

The Stockholm International Peace Research Institute places Poland’s 2025 military outlay at $46.8bn, marking a 23% real-terms increase over the previous year and a 207% jump across a decade.

Baltic States Maintain Outlays Above 5% Amid Deficit Pressures

Estonia’s draft budget allocates €2.2bn to defence to keep its military spending above 5% of GDP while running a 4.0% deficit, according to intellinews.com. Of that total, €632mn is designated for new capabilities including air and missile defence, long-range strike, and ammunition, alongside €100mn for drones. To help manage fiscal constraints, Tallinn pushed back the main line of the Rail Baltica project to 2034, while Prime Minister Kristen Michal noted that European rules permit a 4.5% deficit due to high defence outlays.

In Lithuania, Prime Minister Mindaugas Sinkevicius stated that the country would likely run a 2027 deficit above 3% of GDP to hold defence spending at no less than 5% through 2030 while simultaneously raising pensions and teacher pay. Meanwhile, Latvia is already committed to 5% of GDP next year, rising to 6.4% when internal security is factored in, according to Prime Andris Kulbergs.

Economic Growth Versus Fiscal Sustainability Strains Alliance Frontline

The rapid military build-up is reshaping the regional economy even as it triggers financial warnings. In Warsaw, Deputy Foreign Minister Marcin Bosacki told The Guardian that Russian aggression is heavily influencing the government’s plans for economic development and regional cooperation. It is clearly benefiting Polish security; Polish defence, and the Polish economy as well, Bosacki said in reporting covered by The Guardian.

That economic expansion comes with heavy fiscal costs. Moody’s downgraded Poland’s long-term sovereign credit rating to A3 from A2 on September 18, forecasting that government debt will rise to 68.9% of GDP in 2027 from 59.7% in 2025. Poland’s Finance and Economy Minister Andrzej Domanski warned Bloomberg on September 29 that public debt could breach the statutory 55% threshold in 2028, adding that he saw no room for spending gifts in an election year.

Economist Leszek Kąsek of ING Bank in Warsaw told The Guardian that the current spending path is not sustainable over the long term.

National Security Anxiety Drives Regional Military Posture

The four frontline nations now allocate a larger share of their economic output to defence than the United States, whose core defence spending is estimated at 3.17% of GDP for 2026, down from 3.71% in 2014. Alliance figures show Lithuania reaching 5.33% in core defence spending for 2026, Estonia at 5.10%, Latvia at 4.92%, and Poland at 4.68%, up sharply from levels between 0.88% and 1.90% in 2014.

The push reflects deep-seated regional anxiety. Wedged between larger neighbours and having been subjugated twice within living memory, populations across the eastern flank view the risk of an imminent Russian test of alliance resolve as an overriding security reality, according to reporting by The Guardian.

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