By 2022, Ukraine had established itself as a prominent player in the IT technology market. The start of the full-scale war shifted the development vector toward the defense industry, which became the key to the state's survival and a driver of the economy. During the full-scale war, our state has transformed into one of the world leaders in drone production. Today, Ukraine produces over 1,000 types of weaponry, from FPV drones to missiles. About 40% of the weapons at the front are domestically produced. And a third of GDP growth in 2024 is estimated to have been provided specifically by the military sphere.
The Global Phenomenon of Rearmament
According to data from the Stockholm International Peace Research Institute (SIPRI), global military spending reached a record $2.718 trillion in 2024 – the highest figure since the end of the Cold War, and it continues to grow. Global spending on weaponry has increased by 41% over the last decade. A real rearmament race is underway in Europe. A telling example is the German concern Rheinmetall, which is increasingly reorienting from mechanical engineering to the production of weapons and ammunition.
Against this backdrop, the understanding that defense spending is not just about security, but about a powerful multiplier effect where the development of the defense industry becomes an economic driver, is clearer than ever. This is understood both by states that actively invest in defense contracts and develop lending tools for arms manufacturers, and by the market players themselves, who actively reinvest in scaling production. Rheinmetall CEO Armin Papperger has already called the global situation an "era of rearmament that brings growth we have never seen before." In this context, the consortium reinvested about 8 billion euros during 2023-2024 in the construction of factories, acquisitions, and the development of new supply chains.
The Multiplier Effect Driving the Economy Forward
According to estimates by researchers at the Kiel Institute, an additional 300 billion euros of spending in the defense industry in Europe could generate an equivalent volume of economic activity. According to estimates by German analysts, every "defense" euro generates about 2.7 euros of additional GDP, thanks to the involvement of related industries and technological spillovers – the latter are not just about an immediate growth effect, but about scaling and developing the technologies of the future. To use specific examples, military R&D investments once contributed to the emergence of civilian technologies such as radar, the internet, GPS, and semiconductors. Today, the spheres of technological spillovers already cover artificial intelligence, logistics, cybersecurity, and energy-saving technologies.
Scaling production, creating new jobs, and developing cutting-edge technologies drive the economy forward. However, all of this is impossible without financing. In part, as we noted, states take on the role of investor – through defense orders and additional lending mechanisms, easing tax policies, and facilitating product entry into foreign markets. But the mechanism of manufacturers reinvesting in the development of their own capacities remains critically important here. This is especially relevant for Ukraine, where the state is financially constrained and the possibility of supplying weapons to international markets is not fully open. Under these conditions, the state offers preferential tax regimes, and in 2023, it raised the allowed profitability level for manufacturers of certain types of weapons to 25%, gradually expanding this list to include both ammunition and UAV manufacturers. All of this should facilitate the influx of private investment and reinvestment. Also, the change in the profitability "ceiling" should promote the localization of weapon component production.
Do Ukrainian manufacturers adhere to such profitability? The question remains open, as we found only one case in the public space where a weapons manufacturer disclosed this information. This refers to the Ukrainian manufacturer of long-range strike drones and the "Flamingo" missile, the company Fire Point. 21.5% – this figure was confirmed by international auditors. At the same time, as reported by the founder and chief designer of Fire Point, Denys Shtylerman, all earned funds are reinvested in production, and they managed to achieve 90% localization of their products' components, which means new jobs and the development of related technologies.
"FP-1, FP-2 are more than 90%, in FP-5 only one element is of non-Ukrainian production. And the same goes for the upcoming ballistic missiles – everything will be ours," said Denys Shtylerman.
Ukraine has already gone from producing a few thousand drones a year to 4 million. According to estimates by the Kyiv School of Economics, the defense technology market at the end of 2025 was valued at a minimum of $6.8 billion, with a significant part of the country's GDP growth provided specifically by the defense sector. But it requires a greater load of orders – its potential is far from being fully realized, which also restrains reinvestment, a condition for further scaling of production and the improvement of technologies that are already competitive in foreign markets and generate significant interest among partners.
Modern realities require pragmatic approaches and the understanding that the defense complex is an engine of progress and development. This is not a unique Ukrainian invention, but it is in Ukraine that it manifests most vividly.