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Global Military Spending Back On Upward Track By Howard Wheeldon, FRAeS, Wheeldon Strategic Advisory Ltd.

isis12Ahead of a morning to be spent in MOD Main Building I thought it may be useful for those that have not seen the latest figures on global defence spending and trends to put the essential points out here. The following is for information purposes and, having myself been away when these were published, I am grateful to Defense News for bringing the latest research figures from the Stockholm International Peace Research Institute (SIPRI) to my attention.

The new research from SIPRI shows that total global military spending rose to an estimated $1.6 trillion in 2015. The increase in defence spending worldwide represents an increase of around one per cent from the previous year and it is the first seen in global military spending since 2011. For the record, spending on defence had risen continuously for a period of 13 years between 1998 and 2011 before then decreasing in each of the following four years. From an economic average perspective SIPRI suggests that global spending on defence represents 2.3% of global GDP.

In terms of where growth is coming from and trends SIPRI says that the majority of growth is emanating from Asia, Oceania, central and eastern Europe and some Gulf states. Importantly, there was a slower drawdown on in the USA than in previous years. Nevertheless, US defence expenditure was, at $596bn, still almost triple that of the estimated expenditure by China of $215bn, even though it was down 2.4 per cent from the amount that the US spent in 2014.

Spending by Saudi Arabia, at $87.2bn overtook that of Russia ($66.4bn) for the third place in the global spending list – most of the reason for this being attributed to a fall in the value of the ruble. The UK at $55.5bn changed places with France at $50.9bn for fifth and seventh places, respectively. This was attributed to the fall in value of the euro. The report also highlighted the impact of falling oil prices on defence spending which led to an abrupt fall in spending in countries such as Angola, Chad, Ecuador, Kazakhstan, Oman, South Sudan and Venezuela.

The largest spenders on defence are the USA ($596 billion),China ($215 billion), Saudi Arabia ($87.2 billion), Russia ($66.4 billion), United Kingdom ($55.5 billion), India, ($51.3 billion, France ($50.9 billion), Japan ($40.9 billion) and Germany ($39.4 billion). According to SIPRI

There was no change in the countries that comprised the top 15 military spenders in 2015 compared with 2014, although there were some changes in order. The United States, with total expenditure of $596 billion, remains by far the world’s largest military spender, at nearly three times the level of China, which is ranked second. Nonetheless, US military expenditure continued to decline in 2015 but at its slowest annual rate since 2011 (–2.4 per cent). SIPRI projections for 2016 indicate that US military spending will remain roughly constant in real terms.

Despite additional spending by Saudi Arabia on military operations in Yemen, its annual rate of growth also slowed (5.7 per cent) due to the sharp fall in the price of oil. The fall in oil prices also meant that Russia’s increase of 7.5 per cent on defence spending in 2015 was considerably lower than it had projected in its budget. Moreover, the 2016 Russian budget shows a reduction in military spending is expected. Even so, Saudi Arabia and Russia registered the highest levels of military expenditure as a share of GDP since 1990 (13.7 per cent and 5.4 per cent, respectively). The drop in the value of the euro was a major factor behind the United Kingdom climbing to fifth position above France which fell to seventh position, and Japan overtaking Germany to move into eighth place. Among other top 15 countries in 2015, the largest growth was by Australia (7.8 per cent), while the biggest decrease was by Italy (–9.9 per cent). There were also modest falls for France, Brazil and Israel.

European military expenditure increased by 1.7 per cent in 2015 to $328 billion, 5.4 per cent higher than in 2006 (see table 3). Spending in Western and Central Europe was $253 billion, down 0.2 per cent on 2014 and down 8.5 per cent compared with 2006. Expenditure in Eastern Europe was $74.4 billion, up 7.5 per cent on 2014 and up 90 per cent compared with 2006.There were signs in 2015 that the austerity-driven decline in military spending in Western and Central Europe that has held sway since 2010 may be coming to an end. While military spending in Western Europe continued to fall (by 1.3 per cent in 2015), for the first time since 2009 the number of countries in the sub-region that increased expenditure was higher than the number of those that reduced spending.

The three biggest spenders in Western Europe—the UK, France and Germany—have all signalled a growth in spending in coming years. Military expenditure in Central Europe rose for a second consecutive year (by 13 per cent), with a clear majority of countries increasing spending. Total expenditure in 2015 was slightly higher than its previous peak in 2007. Growth in military spending was most apparent in the countries bordering Russia or Ukraine, reflecting the escalating fear of a threat from Russia. Poland boosted spending by 22 per cent to $10.5 billion in line with its 10-year $40 billion military modernization plan, and military spending reached 2.2 per cent of its GDP in 2015. Romania increased spending by 11 per cent to $2.5 billion and declared its intention to raise its military burden from the current 1.4 per cent of GDP to the North Atlantic Treaty Organization (NATO) target of 2 per cent by 2017.

CHW (London 13th April 2016)

Howard Wheeldon FRAeS

hwheeldon@wheeldonstrategic.com

Tel: 07710-779785

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