in Defence

North Africa and Middle East 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.

* required field

Post a comment

Other Stories
Advertisement
Latest News

Congo Airways poised to go up, up and away…

Democratic Republic of Congo (DRC) national carrier Congo Airways is progressing with its expansion plans and is seeking an equity investor, despite hitting challenges with its regional expansion. Victoria Moores reports.

ZAF looks east for modernisation programme

The Zambian Air Force (ZAF) is negotiating with the Aviation Industry Corporation of China (AVIC) for the possible acquisition of more advanced fighter and trainer jets, helicopters and heavy-lift transport aircraft, as it forges

Helicopter woes for MINUSMA

A little-known UN mission in Mali celebrates its fourth anniversary this month. Since the deployment began, the multidimensional integrated stabilisation mission in Mali (MINUSMA) has been working to help stabilise the situation

First Air Mauritius A350 takes shape in Airbus' Final Assembly line

Assembly of the first A350 XWB for Air Mauritius is advancing well at Airbus' Final Assembly Line in Toulouse, France.

Bestfly retains ISBAO status

At EBACE this week, Angola-based aviation services company Bestfly announced that it has received confirmation it has retained its ISBAO (International Standard for Business Aviation Operators) status for the second year in a row.

New airline will boost Senegal's economy

Boosting Senegalese commercial air transport and tourism were the prime agenda items at a recent Paris conference.

Honneywell ADS-BSK310517
See us at
Aviation Festival BT25114617GroundHandling BT0303280917