Covid-19 Impact: Defence Spending Down Among NATO’s Top European Spenders, predicts Janes

by Janes

The latest budget forecast from Janes predicts minor adjustments in defence expenditure in European countries

LONDON – Janes has revised its forecast for European defence expenditure in 2021 down to USD288.8 billion – a 0.97% decrease on the previous year – after accounting for the economic impact of Covid-19, both in general economic terms and on public spending. Before the Covid-19 crisis, Janes forecast European military expenditure to increase by 2% in 2021 to USD302 billion.

Differences are set to widen in the medium term. Before the crisis, Janes expected defence spending to reach USD324.4 billion in 2025, whereas now the forecast is USD270.9 billion: a difference of almost 20%.

In countries where military expenditure was expected to track economic growth, Janes expects a series of cuts until 2025, followed by a pattern of limited increases to 2030. Defence spending is forecast to lag behind GDP in terms of recovery. That said, an increase in regional tensions, especially in the Baltics or Eastern Europe, could be an incentive for quicker and more significant recovery. However, this would not significantly affect overall expenditure as most of the heavy spenders are in Western Europe.

“The United Kingdom, France and Germany account for up to 50% of overall European spending on defence,” said Ana-Roxana Popescu, senior industry analyst at Janes. “Given the economic impact of the Covid-19 crisis on overall budgets, they are likely to implement cuts to their military expenditure in the near term, bringing down the overall European average. The effect will be relatively long lasting and their combined defence spend in 2031 will be USD25 billion less than initially expected: USD165 billion versus USD190 billion.”

Janes expects countries that had their medium-term defence expenditure linked to certain procurement programmes will try to keep to their military spending plans in nominal terms.

“Countries like Finland, Denmark and Norway are all in the process of modernising their fighter fleets,” said Popescu. “The Covid-19 pandemic has caused the exchange rate to shift in favour of the euro, meaning that in real terms Finland is the only country mentioned whose growth is seen in real terms*. Other European countries with procurement plans in the near future will not escape unscathed. While stable at present, cuts to their defence budgets are expected to be delayed to later in the decade.”

*in real 2020 USD

https://www.janes.com/defence-news/news-detail/defence-spending-down-among-nato-s-top-european-spenders-predicts-janes

Janes has revised its forecast for European defence expenditure in 2021 down to USD288.8 billion – a...

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