Subscribe Free
in Defence

Middle East and North Africa Defence budgets to grow despite low oil price

Posted 23 August 2016 · Add Comment

Despite fiscal concerns and a lower oil price, defence budgets in the Middle East are forecast to reach the spending highs of 2014 by 2019 at the latest, according to new analysis released today by IHS Markit.

The Middle East was the fastest growing region in terms of defence spending between 2012 and 2014. Spending for the Middle East and North Africa peaked at $160 billion in 2014 and then modestly dipped in 2015 due to the dramatic drop in oil prices. However, even at the ‘low point,’ defence spending in 2015 and 2016 in the region will still be higher than 2013 figures. 

“An unstable strategic environment has seen defence spending in the Middle East rise as a share of GDP since 2008,” said Craig Caffrey, principal analyst at IHS Jane’s Defence Budgets. “As the U.S. pivots towards Asia and as sanctions lift on Iran, we are seeing a more proactive stance from states in the Middle East, and defence budgets are likely to rise in the five-year outlook.”

Defence spending returned to growth in the Middle East and North Africa region in 2016, and is expected to rise to almost $180 billion by 2020. “Defence spending trends are heavily influenced by oil prices moves, but defence budgets have actually risen as a share of government spending in the short term, as other spending has been cut,” Caffrey said.

Winners and losers 

Conditions and prospects differ significantly between major energy producing states in the region. According to IHS Janes Defence Budgets, defence spending is expected to fall in Bahrain, Iraq and Oman during the next five years. UAE, Saudi Arabia and Qatar appear to be in the strongest position, aided by non-oil growth and substantial reserve funds.

Algeria

Algeria’s defence budget has grown 17 percent annually in the last decade. In terms of defence spending in proportion of GDP, it has grown from 2.7 percent of GDP in 2005 to 5.9 percent of GDP in 2016.

“Algerian defence spending continues to grow steadily despite the fiscal difficulties presented by the drop in the oil price,” said Fenella McGerty, principal analyst at IHS Jane’s Defence Budgets. “While wider state spending was cut by 9 per cent in 2016, the defence budget actually increased by 2 percent as the majority of the state budget cuts affected healthcare, social security and infrastructure spending.”

Saudi Arabia 

Saudi Arabia is one of the biggest spenders on defence in the region and one of the most exposed to the low oil price. But, there are signs defence and security spending is being protected. 

“The government announced a 30.5 percent cut to defence and security spending in 2016,” Caffrey said. “That sounds like a huge cut, but around 25 percent of all Saudi spending has be re-defined as ‘budget support provision’ and that can be used to support any element of the budget. Given that the overall budget is down about 2 percent, defence will be heavily supported from that funding.”

The Kingdom’s defence budget jumped from $32 billion in 2010, to $48 billion in 2015, and is forecast to break the $50 billion mark in 2019, with a total defence spend of $52 billion. “Saudi Arabia’s defence budget is still one of the biggest in the world,” Caffrey said. “Saudi Arabia is expected to be spending more on defence than France and Russia by the end of the decade.”

Qatar 

Qatar is pursuing wholesale modernisation and expansion of its military capabilities and is leading the way in terms of defence procurement, according to IHS Jane’s Defence Budgets.

“Qatar ostensibly became the fastest-growing defence budget and the largest single export market in the world in 2014,” Caffrey said. “Since 2014, Qatar has finalised $25 billion in deals, which is staggering considering their total defence budget is around $4.5 billion a year.”

IHS Janes Defence Budgets expects Qatar’s defence budget to reach $5.5 billion by 2020 and expects to see significant further investment over the next 24 months.

UAE

Growth in the UAE’s defence budget has been relatively conservative since 2012, but it is likely to increase to over $20 billion by 2020. 

“Between the UAE’s increasingly active role in operations in the region and the implementation of national service and reserve structures from 2015, upward pressure on defence spending seems inevitable,” Caffrey said.il Price, IHS Markit Says

* required field

Post a comment

Other Stories
Advertisement
Latest News

EBACE: TrueNorth new data link unit to improve fairground communications

Communication between pilots and ATC is set to improve following the introduction today at EBACE by TrueNorth, of a new FANS-1/A over Iridium data link unit (DLU) with voice capabilities.

Nextant Aerospace launches large cabin 604XT programme

Nextant Aerospace has announced the launch of a new cockpit avionics programme in conjunction with Rockwell Collins that will bring Pro Line Fusion to the Bombardier Challenger 604 aircraft platform.

FlightSafety International starts Master-level Advanced Training Courses for Dassault Falcon

FlightSafety International has announced the start of new Master-level Advanced Training Courses for the Dassault Falcon 2000EX EASy and 900EX EASy series aircraft.

EBACE: Airbus launches ACJ330neo at European show

Airbus has launched a private jet version of its A330neo at EBACE today. The new VVIP jet combines new-generation engines and aerodynamic and other improvements which the company said will deliver even more comfort, efficiency and true

EBACE: Supercar designer gives new look to Airbus ACJ319neo

Italian exotic car manufacturer Pagani Automobili is moving its design focus to the world of aircraft with a new cabin design for the ACJ319 neo.

Deer Jet to get second 787 DreamJet

Deer Jet is to introduce a second Boeing 787 Dream Jet to its fleet, making it the world's largest operator of the type.

EBACE17 SK0103240517
See us at
AIME BT1204240118EBACE17 BT0103240517DAS BT1105161117DIAC BT11051211176th Annual Mediterranean Business Aviation