After a lackluster 2015, global defence spending rose in 2016 to $1.57 trillion, kicking off what is forecast to be a decade of stronger global defence expenditure, according to the annual Jane’s Defence Budgets Report released today by IHS Markit, a world leader in critical information, analytics and solutions.

“Defence spending returned to a healthy rate of growth in 2016, kicking off what we expect to be a decade of stronger global defence spending,” said Fenella McGerty, principal analyst, IHS Jane’s. “Defence spending should recover to pre-financial crisis levels by 2018.”

Middle East returns to high budgets

As we approach the Intersec show in Dubai it is topical to note that the IHS findings report that despite fiscal concerns and a lower oil price, defence budgets in the Middle East are forecast to recover to the spending highs of 2014 by 2019 at the latest.

The Middle East was the fastest growing region in terms of defence spending between 2012 and 2014. Spending dipped due to the dramatic drop in oil prices. However, even at the ‘low point’, regional defence spending in 2015 and 2016 will still be higher than 2013 figures.

“We’ve seen a pause in growth in the Gulf States as a result of the collapse in oil prices,” Caffrey said. “However, generally speaking, defence has been protected from cuts due to regional instability. In the cases of Kuwait and Qatar, we’ve actually seen significant increases in defence spending.”

Baltics show fastest growth

Interestingly the research finds that the Baltics is the fastest growing region of the areas covered by the study.  Since the Ukraine crisis began, defence investment in the Baltics has doubled and will double again in the next two years.

“The profile of defence spending in the Baltics has changed dramatically in the past two years,” McGerty said. In 2005, the region’s total defence spending came to $930 million in real terms. By 2014, this had grown marginally to $981 million but by 2016, it had soared to $1.45 billion.

“Their defence budgets will all be over 2 percent of GDP by 2018, and each country will have doubled or tripled their budgets from 10 years ago. Annual growth in the region reached 27 percent in 2016 and by 2020, the region’s defence spending will reach $2.1 billion. This growth is faster than any other region globally,” McGerty said.

US biggest spenders

Predictably, the US is still the wolrd leader in defence expenditure.  “Since 9/11, over $9.35 trillion has been allocated to the US defence budget, with the Overseas Contingency Operations (OCO) accounting for $1.62 trillion or 17.3 percent of the total US Department of Defense budget,” said Guy Eastman, senior analyst, IHS Jane’s. After 9/11 a buildup took place through 2010 to support operations in the Middle East and elsewhere, followed by decreasing OCO budgets and troop reductions, bringing the US Department of Defense (DoD) budget to the 2016 value of $622 billion.

The IHS Jane’s Annual Defence Budgets Report is one of the world’s most comprehensive, forward-looking study of government’s defence budgets. Tracking 99 percent of the global defence expenditure from 105 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 study, values are based on constant 2016 US dollars.