2014 will be the first year that global defence budgets will grow overall since 2009, according to the IHS Jane’s Annual Defence Budgets Review from HIS. Total global defence spending in 2014 will be $1,547-trillion up from $1,538-trillion in 2013 – a 0,6% increase in real terms.

“We have seen substantial increases in defence spending from countries like Russia, China, India, Saudi Arabia, and Oman over the past two years,” says Paul Burton, director of IHS Jane’s Aerospace, Defence & Security. “With military budgets among many of the major NATO nations due to continue to contract over the next 12 months, the centre of gravity of defence expenditure is expected to continue to shift south and east in 2014, following the trend of global economic expansion. Russia, Asia and the Middle East will provide the impetus behind the growth in global military spending expected this year and will drive the recovery projected from 2016 onwards.

Key highlights and forecasts from the IHS Jane’s Annual Defence Budgets Review include:

* Four of the top five fastest growing defence markets in 2013 were in the Middle East

* Saudi Arabia’s budget has tripled in 10 years; 2013 marked its largest rise since 2007

* Non-NATO spend is forecast to overtake NATO spend in 2021

* China  is projected to outspend the UK, France and Germany combined by 2015

* Russia grabs third, pushing the UK to fourth and Japan to fifth

* By 2015, the sum of Russia and China’s defence budgets are projected to overtake spending by the EU

* Sub-Saharan Africa budgets rose 18% in 2013 and present long-term opportunities for defence companies.

Fenella McGerty, senior analyst, IHS Jane’s Aerospace, Defence & Security, comments: “Sub-Saharan Africa budgets rose 18% in 2013 and present long-term opportunities for defence companies.

Of particular note in 2013 was the significant 39% growth in Angolan defence spending, the largest growth globally. Spending grew from $4,7-billion to $6,5-billion and is expected to continue to increase as aircraft modernisation efforts continue. While the market is growing, it still accounts for less than 2% of defence spending globally so growth will need to continue in order for more opportunities to arise in the long term.”

McGerty adds: “We have seen a rapid acceleration of defence spending in the Middle East since 2011. Four of the top five fastest growing defence markets in 2013 were Middle Eastern countries. If we stretch to look at the top 10 fastest growing markets, six of the 10 were in the Middle East. Oman and Saudi Arabia, in particular, have seen rapid growth of over 30% between 2011 and 2013. Since 2011, Oman’s defence budget has now increased by 115%, from $4,7-billion to $9,2-billion in nominal terms.

“Saudi Arabia is not far behind,” McGerty says. “It increased its defence and security budget by about 19% in 2013, the largest rise in spending since 2007. Total expenditure on the sector has now reached $67-billion and has more than tripled in nominal terms over the past decade.”

Craig Caffrey, senior analyst at IHS Jane’s Aerospace, Defence & Security, comments: “Asia Pacific is the only region where from 2009 onwards we have seen a steady rise in defence expenditure. Based on IHS Jane’s Defence Budgets projections, Asia Pacific’s share of global budget spend will grow to 28% from its current 24 percent by the end of the decade, reaching $474-billion.”

Caffrey adds: “If we step back and look at Asia Pacific without China, we see the region overtaking Western Europe in 2015. Australia, India and South Korea are all increasing their defence budgets. Over the next three years, forecast increases for core defence spend in Australia suggest that the procurement budget will increase significantly.

“In Japan, where previous governments have sought to restrict defence spending and focus resources on bringing down government debt and improving economic performance, the Abe administration increased core defence spending in 2013 and has asked for additional funds for the FY14 budget.

“Despite suggestions to the contrary throughout late 2012 and early 2013, the Indian government announced a further significant increase in its defence budget. Total defence spending, including pensions and defence ministry expenses, increased to USD46.2 billion and we’re expecting further growth in 2014.”

McGerty adds: “By 2015, China will spend more than the UK, France and Germany combined. In 2015, China is expected to spend $159,6-billion, while the sum of the three largest Western European markets is expected to reach just $149-billion. Defence budgets in the five largest Western European markets (UK, France, Germany, Italy and Spain) decreased by 1,3% in 2013. Regional spending totaled $242,8-billion in 2013 and this is expected to decrease to $237-billion by 2018 in real terms.”

Furthermore, according to Caffrey, “IHS projections suggest that official Chinese defence spending for 2014 is likely to be in the region of $130-billion, around 10 times the size of Taiwan’s budget. Taking adjustments for pensions and military R&D into account, Beijing’s military expenditure is now thought to account for around 9% of the global total.”

Russian defence spending is set to increase over 44% in real terms over the next three years, Caffrey says.

“Under the Duma’s adopted plan, Russian defence spending will rise from about $68-billion in 2013 to just over $98-billion in 2016. This plan propelled Russia to the third largest defence spender in the world. The rapid increase in spending means that the defence budget will increase to 15,7% of federal expenditure in 2013 and to 20,6% by 2016. These additional funds will likely be spent on modernising equipment, and improving training and social conditions for military personnel,” Caffrey says.

“The decline in global defence spending over the past five years or so has been heavily influenced by the decline of the US defence budget, primarily due to decreased Overseas Contingency Operations (OCO) funding allocations,” said Guy Eastman, senior analyst at IHS Jane’s Aerospace, Defence & Security. “Combined with decreases in Western Europe, the portion of global defence represented by the West has and will continue to decrease over the near-term.