Challenges to national defence in contemporary geopolitical situation

Contemporary studies show that military power depends not only on manpower, weapons, or resources, but in many cases, success on the battlefield is determined by the potential of human capital, including knowledge, skills, competences, and other capacities [1; 2]. Using a cost-based approach, the author focuses on the input side assessing military human capital potential in the context of defence expenditure – economic development nexus in the Baltic countries, such as Lithuania, Latvia, and Estonia. The investigation covers the period between 2004 and 2020. Defence expenditure on personnel has been used as a proxy for military human capital potential, and real gross domestic product (GDP) per capita as a proxy for economic development. Research is carried out using econometric methods, including Spearman’s correlation analysis and Automatic Linear Modelling (ALM). The research results reveal that investments in military personnel have significant and positive impact on economic development in the Baltic states. Defence expenditure on personnel explains 63.7 percent of variation in real GDP per capita in Lithuania, 71.3 percent in Latvia, and 63.4 percent in Estonia. The author hopes that the findings of the investigation will extend the scope of research across the Baltic States and will be useful for the achievement of Sustainable Development Goals (SDG 8, economic g rowth).