A challenging economic picture during 2020 and changing dynamics in procurement processes, timelines and requirements may alter the longer-term growth of defence budgets in the region.
ABU DHABI – The latest analysis from Janes highlights that defence spending in Gulf Co-operation Council (GCC) countries is to decline by 9.4% in 2021, as countries in the region face pressure due to the impact of Covid-19 and low oil prices. However, the trusted global agency for open-source defence intelligence expects a swift rebound in coming years.
Janes data shows that defence expenditure for the GCC states rose by 5.4% in 2020, from USD94.9 billion in 2019 to USD100 billion in 2020. However, in 2021 this figure is expected to drop to USD90.6 billion before falling to USD89.4 billion in 2022. A return to growth should mean that spending will return to pre-pandemic levels by 2024. Janes also expects procurement expenditure to decline slightly to USD13.25 billion in 2021, following a 4.5% surge in 2020.
“The significant drop in oil prices during 2020, coupled with a corresponding decline in demand from the manufacturing and transportation sectors, resulted in increased pressure on government budgets. Revenues from oil and gas declined, while non-oil revenues from industries such as travel, finance, and tourism were also impacted as lockdowns kicked in globally,” said Charles Forrester, Lead Analyst at Janes. “Previous collapses of oil prices in 2014 and 2016 were met with stronger financial reserves and ongoing security threats in Iraq, Syria, the Gulf and Yemen meaning that governments were able to ring-fence defence expenditure from any significant cuts at the time.”
Janes analysis highlights that defence may not be as protected as before, particularly as some countries in the GCC region were already facing fiscal deficits at the start of 2020.
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