Global defence spending surpasses USD1.8 trillion in 2019 supported by robust growth in European markets, says Janes

Analysis from Janes highlights that the sixth consecutive year of global defence spending growth was bolstered by a 5% jump in Europe as the US budget fell from 2018 spike to USD726.2 billion.

LONDON (January 9, 2020) – According to Janes Defence Budgets 2019 Annual Report, growth in global spending slowed to just 1% compared to the 2018 spike of 6%. While growth slowed in most regions, Europe experienced exceptional growth of 5.2%, outperforming most emerging markets. Six of the ten fastest growing defence budgets in the world in 2019 were situated in Europe – including Bulgaria, which reported the fastest growth globally, with defence spending growing by 125% as the country made payment for eight F-16 Block-70 fighter jets in August.

“While growth in global defence spending slowed dramatically this year, Jane’s projects that global spending growth will moderate to between 1.5-2.0% a year over the next ten years” said Fenella McGerty, principal defence budgets analyst at Janes.  “Increases are dependent on the continuation of a stronger emphasis on defence in Europe but also on a return to more robust growth rates in emerging markets.”

Europe tops global growth chart as regional spending approaches USD300 billion

European defence spending is set to hit USD300 billion in the next 24 months, having languished between USD250 billion and USD275 billion since 2005.

Janes notes that Eastern European spending grew by 12% in 2019, the fastest rate globally while growth in Western Europe reached 4%, the fastest rate since the Cold War. Key Western European growth markets in 2019 include Germany and Sweden with respective defence budget increases of 11% and 9%. Germany is now the 7th largest spender globally, up from 9th in 2018.

“Shifting strategic conditions have driven growth in European spending since 2014 as the regional security environment has deteriorated,” McGerty said. “Increases in Eastern Europe have been focused on improving readiness and bolstering capabilities. As such, spending on military investment in Eastern Europe has more than doubled since the annexation of Crimea in 2014 – from USD4 billion in 2013 to USD10.4 billion in 2019.”

Over the next decade Janes expects that growth in Eastern European defence spending will average 4.0% annually to reach USD57 billion by 2030 and account for 2.7% of the global total.

US continues to invest in modernisation 

After a 10% surge in 2018, US spending rolled back to USD726.2 billion but still accounts for 40% of the global total.

“In real terms, funding levels of USD742 billion in 2018, USD726 billion in 2019 and USD721 billion in 2020 have enabled the US DoD to start and continue on the road to improved readiness and acquire improved warfighting capabilities” said Guy Eastman, senior analyst at Janes. “Modernisation accounts are expected to reach the level of USD247.3 billion in FY20 - the highest request level of investment funding in the last ten years. This will permit accelerated acquisition of capabilities inherent in ballistic missile defence, shipbuilding, military aircraft and missiles and munitions as well as RDT&E in science and technology.”

“The US continues to focus spending increases on innovation, with 2020 funding extensions for hypersonics, artificial intelligence, directed energy, autonomy, cyber and space.”

Gap between North America and ASPAC defence spending shares projected to close over the 2020s

In 2009, North America accounted for over half global spending of USD1.67 trillion, while ASPAC markets accounted for less than a fifth. Growth in emerging markets since then has seen North America’s share fall to 41% compared to 26% for ASPAC in 2019.

“Janes highlights that the North American share of global spending could fall to 33% by 2029, matching that of ASPAC.  Wider growth is expected to be led by a return to more robust increases in established markets in the Middle East and Asia and augmented by a continued expansion in European defence spending.” said McGerty.

Fourth time lucky? Sub-Saharan Africa reports spending increase after 3 years of negative growth

 “Military expenditure in Sub-Saharan Africa recorded a 2% increase this year, with growth expected to continue in the coming decade. Jane’s notes that regional budgets in 2030 are expected to be close to USD18 billion – as opposed to the USD13 billion we see this year,” said Ana Popescu, senior analyst at Janes. “Modest growth has been seen by Kenya and Tanzania, which recorded growth of 9% and 4.5% respectively.”

Bigger spenders – like South Africa, Angola and Nigeria – saw budgets cut year on year, but all are expected to recover, except Angola, which is expected to see its budget fall further to USD1.6 billion in 2020. Nigeria, meanwhile, will have a significant increase of 36% in spending in 2020, but Janes notes that the funds are almost entirely allocated to personnel costs, putting into question the commitment to procurement. 

Middle East spending predicted to surpass USD200 billion by 2026 

Middle East regional spending came to USD174 billion in 2019 and should surpass USD200 billion by 2026 despite a short term slow-down in Saudi Arabia’s defence budget. Janes notes that growth remains conservative by regional standards as governments generally remain cautious about pursuing expansionary budgetary measures, particularly in light of volatile energy prices. Nonetheless, complex security threats have ensured defence spending was ringfenced from wider cuts as countries pursued an expansion of personnel numbers, increased readiness, greater operational activity and major investment programmes. 

“The acute nature of security concerns within the region mean that defence budgets will continue to be shaped by strategic factors. Despite fiscal constraints, widespread militant activity, intense inter-state rivalries, and the adoption of a more pro-active stance towards regional stability continues to result in elevated levels of military spending in the Middle East,” said McGerty. “Consequently, regional spending continues to account for almost 5% of GDP compared to the global average of 2%.”

Growth in Asia-Pacific continued to stall in 2019, falling to its lowest rate since 2010 

Janes highlights that regional spending came to USD472 billion in 2019, up from USD250 billion in 2005, a 90% increase in real terms over a 14-year period. While 2019 growth maintained the region on an upward trend, growth of just 2.9% was also the slowest annual expansion since 2010. Stronger growth should be possible from 2020, driven primarily by an acceleration in Chinese spending.

Janes Defence Budgets estimates that the Chinese defence budget came to USD217 billion in 2019, accounting for 46% of the regional total, up from 40% in 2012. The next biggest spender in the region is India, whose 2019 budget was set at USD56 billion, or just over 12% of total spending.

“Economic expansion has been the primary driver of increases in defence expenditure in ASPAC since 2009 and growth in defence funding has closely tracked the expansion of the region’s economies over the same period. On the strategic side, the threat from North Korea has spurred growth in Japan as well as South Korea; conflict between India and Pakistan over Kashmir has been rekindled; and there has been sustained investment in countering long-running insurgencies in South-East Asia,” Popescu said.

More NATO members to hit spending targets 

Ten NATO members reached the 2% of GDP benchmark for defence expenditure in 2019 – the US, Bulgaria, Greece, Estonia, Latvia, Romania, UK, France, Poland and Lithuania. This compares to just four members in 2014 – the US, the UK, Greece, and France (figures include military pensions).

“NATO’s 70th year saw ten countries achieve the 2% of GDP benchmark up from just four members five years ago. Crucially, more and more countries are also investing over 20% of their defence budget in equipment with 19 members reaching the goal in 2019 – the highest number since 2007,” McGerty said.

Analysis from Janes highlights that the sixth consecutive year of global defence spending growth was...

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