Middle East Defence Spending To Reach $920bn By 2020

Around $27 billion will be injected into the Gulf economy through defence deals by 2020, new research says.



Defence spending in the Middle East is projected to soar to $920 billion between 2014 and 2020, according global consultants IHS.

“Economic prosperity has been one of the reasons behind the rapid acceleration of defence spending in the Middle East since 2011,” said Craig Caffrey, senior defence budget analyst at IHS Jane’s Aerospace, Defence & Security.

“Four of the top five fastest growing defence markets in 2013 were Middle Eastern countries. As we look at spending in the next decade, there are no signs that the sector is slowing down.”

Defence expenditure is also set to inject a large amount of capital into the GCC economy, the report said.

“By 2020, $27 billion will be injected into the Gulf economy from defence deals via offset programs,” said Guy Anderson, senior principal analyst at IHS Jane’s Aerospace, Defense and Security.

“Defence offsets are a form of direct or indirect economic compensation to balance defence equipment purchases, and they are increasingly becoming the deciding factor in larger military acquisition programs.”

Saudi Arabia will benefit the most from defence deals, Anderson predicted.

Around $12.6 billion will be added to the Kingdom’s economy by 2020 compared to $12.2 billion to the UAE economy. India set to come third with around $10.4 billion to be added to the economy through defence deals.

“The Gulf has placed a strong emphasis on the long-term economic value of defence offsets,” Anderson said.

“An IHS review of Gulf offset programs found that the region is emphasising the development of its non-oil sector economy, specifically advanced training and investment.

“Economic diversification is seen as one avenue to achieve long-term economic goals and defense industrialisation is viewed as a route to economic change and an opportunity to create jobs for nationals.”

Defence spending in Gulf countries has been rising due to Arab states’ worries over Iran and the Arab Spring protests in 2011.

A recent report from London’s International Institute for Strategic Studies (IISS) showed that Saudi Arabia overtook Britain to become the world’s fourth largest defence spender in 2013.

Although global defence spending fell marginally last year, IISS said that it rose significantly in the Middle East and Asia.