As a strategic matter, during wartime, the economic output of the entire country can be redirected to war efforts.
Relative economic output of different forces is a major determining factor in war outcomes.
The percentage of GDP during peace-time serves as an indicator of readiness for war.
It is worth noting that Sweden staved off the USSR during the cold war with this very cleverly designed tank: https://www.youtube.com/watch?v=bSNNNMYmTKQ