DEFENCE
18 | Flight International | 10-16 December 2019 flightglobal.comPROCUREMENT GARRETT REIM LOS ANGELESGlobal tensions set to drive spending
Demand for military equipment is on the rise, prompted by a complex international security environment, says Deloitte
C
hilling relations between the
USA, China and Russia are
forecast to push military spend-
ing higher in 2020, continuing a
trend that bodes well for the
aerospace industry.
Total defence spending is
estimated to grow by 3-4% next
year to reach $1.9 trillion world-
wide, with funds primarily spent
on modernising and replacing
ageing equipment, according to a
report released by consultancy
Deloitte.
“Demand for military equip-
ment is on the rise as
governments across the globe
focus on military modernisation,
given increasing global security
concerns,” the 2020 Global
Aerospace and Defence Industry
Outlook says. “The uncertainty
and sustained complexity of the
international security environ-
ment worldwide is likely to boost
global defence spending over the
next five years.”CASH BOOST
The USA maintained its position
as the world’s top military
spender in 2019, with a budget of
$716 billion. Washington is
expected to keep its top place in
2020, but has yet to finalise its
spending figure.
Other so-called “Great Power”
nations, such as China and
Russia, as well as regional pow-
ers including India, are likely to
continue increasing their spend-
ing in the coming years, the
report adds.
Worldwide military spending
is expected to grow at a
compound annual rate of about
3% over the 2019–2023 period,to reach $2.1 trillion by 2023,
according to Deloitte’s report.
“In Asia, higher defence
spending by major regional pow-
ers such as India, China and
Japan will likely contribute to
global sector growth,” it states.
“In Europe, members of NATO
are also increasing defence
budgets to reach a defence
spending target of 2% [of gross
domestic product]. Apart from
this, ongoing geopolitical ten-
sions in the Middle East are cre-
ating a strong demand for mili-
tary equipment.”
International demand for new
equipment should benefit US
manufacturers through Washing-
ton’s Foreign Military Sales
(FMS) programme, says Deloitte.
Such deals rose by 33% to reach
$55.7 billion in 2018, according
to its report, and the first ninemonths of 2019 maintained this
level of activity, with deals struck
worth $44.2 billion.
“However, a strengthening
dollar could dampen growth [in
FMS] as some of the European
defence exporting nations could
become more price competitive,”
notes the report.
China remains the second-
largest military spender, having
reached a 14% share of the global
total in 2018. Beijing’s military
budget for 2019 is expected to
have risen by 7.5%, to $
billion, versus an 8.1% rate of
growth the previous year.
Economic growth in China has
been slowed by a trade war with
the USA, while Beijing is also
trying to deal with rising levels of
government debt, Deloitte notes.
Russia’s defence spending fell
by 3.5% in 2018, to $61.4 billion.This drop was caused by slow
economic growth, in part as a
result of European and US
sanctions, and last year saw the
nation drop out of the top five
defence-spending nations for the
first time since 2006.
However, Moscow’s reduced
defence outlay still equated to
3.9% of GDP in 2018 – higher
than the USA’s 3.2% figure.INDIAN POTENTIAL
The report also highlights that as
an important rising power, India
boasts one of the fastest-growing
military budgets.
New Delhi plans to spend
$130 billion to modernise its
military over the next five years,
and its $44.6 billion allocation for
2020 represents a 9.3% increase
from 2019. ■
See Directory PChina remains the world’s second-largest purchaser, with a forecast budget of $178 billion this year
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