Taiwan proposes record defence budget, though spending growth slows

TAIPEI (Reuters) -Taiwan’s military spending will rise a modest 3.5% year-on-year to hit a fresh record high in 2024, President Tsai Ing-wen said on Monday as she pledged continued efforts to improve defences amid a growing China threat.

China, which views democratically-governed Taiwan as its own territory, has ramped up military and political pressure over the past three years to assert those claims, which Taipei strongly rejects.

The overall defence budget proposed by Tsai, which will need parliamentary approval, is T$606.8 billion ($19 billion), amounting to 2.5% of the island’s GDP.

That would be the island’s seventh consecutive year of growth in military spending, though the rate of growth will be far slower than the 14% year-on-year rise seen this year.

As in 2023, the budget will include a “special budget” for unspecified extra spending. Tsai did not provide details about that in a statement from her office released after a meeting with senior officials on Taiwan’s overall budget plans.

“Taiwan must continue to strengthen its self-defence capabilities, demonstrate its determination for self-defence, ensure its national security and interests, and seek more international support,” she said.

Tsai has overseen a military modernisation programme to make Taiwan’s armed forces better able to face China, including upgrading its fleet of F-16 fighter jets and developing its own submarines.

Tsai noted at the meeting that the first prototype indigenous submarine was expected to be unveiled next month as scheduled.

Still, the spending increase is far less than the 7.2% rise China proposed for its defence spending this year.

Taiwan’s 3.5% rise is roughly in line with government predictions for overall GDP growth next year.

However, this year the economy is only expected to grow 1.36%, which will be its slowest pace in eight years, held back by soft demand for its technology products amid global economic woes.

“In the face of the challenges of slowing global economic growth and rapid changes in the international political and economic situation, I would like to ask the executive team to carefully plan based on sound finances, and be sure to properly allocate resources,” Tsai told the meeting.

The budget will be formally put to the Cabinet on Thursday, when more details are expected to be released.

($1 = 31.9440 Taiwan dollars)

(Reporting by Ben Blanchard, editing by Ed Osmond and Andrew Heavens)