Global Defense Spending to Grow After Years of DeclineDavid Lerman
Defense spending globally will increase this year for the first time since 2009 military budgets surge in Russia, Asia and the Middle East, according to an annual defense budget review by IHS Jane’s.
Four of the five fastest-growing defense markets last year were in the Middle East, the study found, according to a statement by the company. The defense budgets of Russia and China combined will exceed total defense spending of the European Union by 2015.
“Russia, Asia and the Middle East will provide the impetus behind the growth in global military spending expected this year and will drive the recovery projected from 2016 onwards,” Paul Burton, director of IHS Jane’s Aerospace, Defence and Security, said in the statement.
Russia, which is projected to increase defense spending by more than 44 percent in the next three years, now ranks as the third-largest military spender, pushing the U.K. into fourth place, the study showed.
The U.S. remained the top spender last year, at an estimated $582.4 billion, followed by China, with $139.2 billion. Russia spent $68.9 billion.
No region has seen a faster surge in defense spending than the Middle East, where Oman and Saudi Arabia have increased their military budgets by more than 30 percent in the last two years, the study said. Saudi Arabia’s budget has tripled in 10 years.
“We have seen a rapid acceleration of defense spending in the Middle East since 2011,” said Fenella McGerty, a senior IHS analyst, in the statement.
China, already the No. 2 spender, will spend more than the U.K., France and Germany combined by 2015, McGerty said. China is forecast to spend $159.6 billion that year, compared with $149 billion for the three largest markets in Western Europe.
Total global defense spending this year is projected to reach $1.547 trillion, a 0.6 percent increase from last year’s $1.538 trillion, after adjusting for inflation, the study said.
That increase is the first since 2009.
“The decline in global defense spending over the past five years or so has been heavily influenced by the decline of the U.S. defense budget,” which was cut as part of the drawdown from the Iraq and Afghanistan wars, said Guy Eastman, a senior analyst.
“Combined with decreases in Western Europe, the portion of global defense represented by the West has and will continue to decrease over the near term,” Eastman said in the company statement.
Major U.S. defense contractors, including Lockheed Martin Corp., Boeing Co., Northrop Grumman Corp. and Raytheon Co., are expecting to increase their international sales -- especially to the Middle East -- for everything from jet fighters to missile defense, said Kevin Brancato, a Bloomberg Government defense analyst.
Even so, the global market for these companies may be unchanged or decline slightly this year, particularly if Russia and China are driving the overall growth, Brancato said.
The study also identified long-term opportunities for defense companies in sub-Saharan Africa, where military spending rose by 18 percent last year. Angola’s spending grew 39 percent last year.
While the African market is expanding, “it still accounts for less than 2 percent of defense spending globally, so growth will need to continue in order for more opportunities to arise in the long term,” McGerty said.
IHS Jane’s is part of IHS Inc., based in Englewood, Colorado.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.