LONDON: With Middle East defence budgets will return to growth in 2017 as the region increases its drive to acquire new military capabilities, the Kingdom of Saudi Arabia plans over $50billion defence spending in 2017, according to new analysis released by IHS Markit (Nasdaq: INFO).
“Defence procurement activity is starting to pick up in the Middle East following a brief dip due to the collapse in oil prices” said Craig Caffrey, principal analyst, IHS Jane’s Defence Budgets. “We expect Saudi Arabia and the UAE in particular to begin to start to spend heavily again over the next two years.”
IHS Jane’s expects 2 to 3 percent growth a year by 2018 in real terms. Defence spending for the Middle East and North Africa region will rise to around $180 billion by 2020.
Saudi Arabia will remain by far the largest spender on defence in the region for the foreseeable future. In dollar terms, Saudi Arabia is now the fourth largest spender on defence globally. The depreciation of the pound has seen the UK drop to fifth.
“The Saudi defence budget will return to growth in 2017 and we’re likely to see that trend continue going forward as the country seeks to maintain its position as the region’s pre-eminent military power,” Caffrey said.
“Traditionally, military capabilities in the region have been focused on territorial defence,” said Reed Foster, analyst at IHS Jane’s Military Capabilities. “Now we are seeing the acquisition of strategic transport and tanker aircraft, intelligence gathering platforms and precision guided munitions and targeting pods. This is an attempt to build the kind of capabilities required to conduct operations beyond their borders.”
“In the short term, I think we’ll continue to see further investment in combat aircraft and related systems and likely more funding for supporting capabilities like transports and C4ISR platforms,” Caffrey said. “Longer term we’re likely to see an increase in investment in naval systems.”
“Other than low oil prices and the threat from the Islamic State, the re-emergence of Iran following years of sanctions is an issue that could impact defence spending in the region,” Caffrey said. “We’ve seen significant investment in missile defence systems over the last five years, aimed directly at countering the perceived threat from Iran. But, if we start to see a more proactive, emboldened Iran over the coming years with a growing economy and an expanding defence budget then that’s likely to cause additional concern. It will likely prompt reciprocal increases in defence spending elsewhere in the region.”
“Many of the medium-term defence acquisitions that we’re now seeing in the Gulf are in light of the potential removal of most conventional military sanctions against Iran in late 2020 under the terms of the current nuclear deal,” Foster said. “The uncertainty of a more capable Iran coupled with questions regarding US long-term engagement in the region have induced many Gulf states to ‘green light’ a number of strategic procurement programmes.”