The Serbian government made budget savings of around 480 million euros ($515.95 million) in the first quarter of 2017 and wants to inject nearly 10 percent of that sum into the defense industry, Prime Minister Aleksandar Vucic said Thursday.
Vucic also said Serbia's exports of weapons and military equipment was expected to reach 550 million euros in 2017, up from an estimated 449 million euros last year.
"We agreed to give big money to the defense industry. ... When you have a market that is secured for a decade or so, then you invest in production," Vucic told a news conference after meeting top executives from the sector.
He said the funds would be used to develop new factories and overhaul existing ones, based on increased demand in the global weapons market.
Serbia exports small arms, artillery systems, missiles, ammunition and various equipment through 173 licensed companies to dozens of countries, including the United States, Israel, Canada, Myanmar and Saudi Arabia.
In February, Assistant Defence Minister Nenad Miloradovic said the United Arab Emirates remains a key market for Serbia's defense industry, where it has "active contracts" worth some $220 million, the B92 news portal reported.
The budget savings have been generated by structural reforms and improved tax collection. Serbia's budget deficit is seen at around 1.2 percent of GDP this year, down from 2.1 percent at the end of 2016, and economic growth is put at around 3 percent.
Vucic said Serbia's own 28,000-strong armed forces also needed new weaponry and modernization.
Belgrade has recently procured six MiG-29 jets, 30 tanks and armored personnel carriers from Russia as well as nine helicopters from Airbus.
Serbia's military budget for 2017 accounts for 1.39 percent of GDP, or around $503 million. The country is militarily neutral and tries to balance between NATO and Russia, its traditional Slavic and Orthodox Christian ally.