• Saudi defence budget expected to hit $60bn by 2020, says IHS
  • Kingdom only cut defence spending once in 15 years
  • Qatar expected to sustain jump in military spending

Saudi Arabia, the UAE and Qatar are expected to spend significantly on defence despite the drop in oil and gas prices impacting government revenues, according to a new study by US-based consultancy IHS.

Saudi Arabia is forecast to increase defence-specific spending to about $60bn a year by 2020 from its present $49bn to give it the fifth-largest defence budget in the world.

“Despite Saudi Arabia’s heavy exposure to oil price fluctuations, there have been very few signs of any severe reactionary adjustments to government spending trends,” says Craig Caffrey, principal defence budget analyst at IHS Jane’s Aerospace, Defence & Security. “The kingdom has only cut defence and security expenditure once over the past 15 years.”

The kingdom’s defence budget has been expanding at about 14 per cent a year over the last decade and 19 per cent a year since 2001.

“We certainly expect a significant slowdown in the short term, but longer-term prospects remain strong,” says Caffrey.

Saudi Arabia has replaced India as the world’s largest importer of defence equipment in 2014, and is expected to consolidate this position even further in 2015.

The UAE’s rapid defence spending growth came between 2007 and 2011 and the military budget has been consolidated over recent years.

But the $5bn of contracts announced at the International Defence Exhibition (IDEX) in February 2015 suggests that funding is still available despite lower oil revenues.

“Moderate defence budget growth is expected in the UAE over the short term before accelerating from 2017 as the process of fiscal consolidation eases,” says Caffrey.

Qatar has historically not seen military expansion as a priority but saw a significant increase in spending in 2014. IHS expects these elevated levels to continue in the short term.

“The announcement of $23bn worth of potential defence procurement projects in 2014 marked an unprecedented increase in investment in the military [in Qatar],” says Caffrey.

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