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Saudi, Qatar and UAE Defence Budgets Not Shrinking Despite Oil Price Drop, New IHS Report Says
Large deals and budgeting secure future defence growth engines
LONDON, UK (2 June, 2015) – The outlook for defence spending in Saudi Arabia, Qatar and the United Arab Emirates – unlike that of their neighbors – remains positive, according to a new analysis released today by IHS Inc. (NYSE: IHS), the leading global source of critical information and insight.
“Despite Saudi Arabia’s heavy exposure to oil price fluctuations, there have been very few signs of any severe reactionary adjustments to government spending trends,” said Craig Caffrey principal defence budget analyst at IHS Jane’s Aerospace, Defence & Security. “The Kingdom has only cut defence and security expenditure once over the last 15 years.”
The country’s defence budget has been expanding at a rate around 14 percent a year over the last decade and accelerated to a rate of 19 percent a year since 2011. “We certainly expect a significant slowdown in the short term but longer term prospects remain strong,” Caffrey said.
IHS Aerospace, Defence & Security forecasts Saudi Arabian defence specific spending to increase to around $60 billion a year by 2020 from its present $49 billion, making it the fifth-largest spender in the world by that time.
United Arab Emirates
Although the energy sector accounts for about 55 percent of gross domestic product (GDP) in the UAE, the country’s ability to withstand a period of low oil prices has been bolstered by its relative economic diversity.
A significant difference between the UAE and a number of other Gulf Cooperation Council (GCC) states is that its period of rapid defence spending growth came between 2007 and 2011.Also, the military’s budget has essentially been consolidated over recent years.
While a more cautious approach may be adopted with regards to major procurement projects, the $5 billion of contracts announced at the International Defence Exhibition (IDEX) in February 2015 suggests that funding is still available.
“Moderate defence budget growth is expected in the UAE over the short term before accelerating from 2017 as the process of fiscal consolidation eases,” Caffrey said.
Qatar’s reliance on the energy sector is relatively low for the Gulf region, accounting for approximately 60 percent of total revenues. National bank figures suggest that the government has begun to utilize Qatar’s foreign reserves to support continued investment expenditure as revenue generation slows.
“Traditionally the military has not been seen as a priority by Qatar’s government. However, the announcement of $23 billion worth of potential defence procurement projects in 2014 marked an unprecedented increase in investment in the military,” Caffrey said.
Defence expenditure is therefore expected to remain at the elevated levels seen in 2014 in the short term. In the longer term, the main obstacle will be whether the government continues to invest in defence once the current procurement cycle ends or whether focus will shift elsewhere.
To learn more about IHS Aerospace, Defence & Security Budgets visit www.ihs.com/jdb
The IHS Jane’s Annual Defence Budgets Review is the world’s most comprehensive, forward-looking study of government’s defence budgets. Tracking 98 percent of the global defence expenditure from 91 of the world’s largest defence budgets, data is compiled from IHS Jane’s Defence Budgets online solution platform. It includes five-year forecasts, historical data, budget charting, trend evaluation and in-depth analysis by country. In this analysis, values are based on constant 2015 US dollars.
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IHS (NYSE: IHS) is the leading source of insight, analytics and expertise in critical areas that shape today’s business landscape. Businesses and governments in more than 150 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs about 8,800 people in 32 countries around the world.
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