Defence spending plans in a series of the world’s largest defence markets are on course to be derailed in the near-term by the economic impact of the Covid-19 pandemic.
The outlook for Brazil, China, Japan, Russia, the United Kingdom, and the United States is negative with varying depths of decline foreseen by Jane’s to 2023.
Approach to analysis
Jane’s Defence Budgets has produced a base top-line defence spending scenario for seven large countries based on early gross domestic product (GDP) forecasts in relation to the Covid-19 pandemic.
The aim was to gauge the extent to which the macroeconomic impact of the virus might affect these countries. The objective was not to attempt to produce any details of the likely shift within defence budgets, although it is reasonable to expect expenditure to move away from areas such as procurement.
Similarly, this early study intentionally remains detached from the fast-moving details of the strategic and political environment.
Instead the Jane’s Defence Budgets Covid-19 scenario applies an update to the annual growth of each country’s GDP; in most cases this introduces a sharp slowdown or contraction, followed by a relatively robust recovery.
Secondly, it takes one of the few relevant pieces of data available in this situation – the reaction of the countries under review to the last major worldwide recession in 2008 and 2009 – in the form of their defence budgets expressed as a percentage of GDP.
The changes in this datapoint over the years following the global financial crisis were recorded for each country, and the same movements applied to defence spending in the years to 2023, with 2009 and 2020 taken as base years.
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