Western European defence budgets to grow for first time in six
years in 2016; Eastern Europe fastest-growing region for defence
budgets in 2015
A deteriorating security situation has caused Western European
defence budgets to rise for the first time in six years, according
analysis released at the Eurosatory defence and security trade show
by IHS Inc. (NYSE: IHS), the leading global source of critical
information and insight. Approximately $50 billion will be added to
Western European defence budgets across the region between 2016 and
2019.
“The deteriorating security environment in Europe over the last
two years has resulted in a sharp reversal of defence spending
trends in several EU member states, particularly those in the
Western Europe,” said Fenella McGerty, principal analyst at IHS
Jane’s Defence Budgets. “Ten countries in Western Europe
implemented cuts to their defence budget in 2015; only five are
expected to do so in 2016.”
Western European defence spending has been cut by 1.3 percent on
average annually since 2009. This year, 2016, will be the first
year of growth. However, the recovery to pre-financial crisis
levels won’t be expected until around 2020.
Speaking at the Eurosatory conference in Paris, McGerty noted
the drivers of this change include Russian actions in Ukraine,
terrorist acts in France and Belgium, and operations against the
Islamic State.
“The 7 January and 13 November attacks in Paris led to an acute
upward revision to the French military financing plan and sent
wider ripples throughout the region as countries looked to
re-assess their security measures and protocols,” McGerty said.
“Germany pursued further upward revisions to defence spending plans
and the UK improved its outlook beyond 2017. Austria’s recent 17
percent increase in defence spending is the latest in a series of
regional trend reversals over the last year.”
UK – increasing spend to 2019
According to the 2015 SDSR and Spending Review, defence spending
in the UK will increase 3.1 percent in real terms for 2015 to 2019.
Furthermore, security and intelligence agencies were given an
additional £1.3 billion, cyber security an additional £1.9 billion,
and the country’s defence equipment plan was increased by £12
billion to fund over 170 projects. "Defence spending is to remain
above 2 percent of UK GDP for now, but will continue to decline as
current projections for economic growth outpace growth in defence,”
McGerty said. “Of course, projections are likely to be altered upon
the result of the upcoming EU Referendum."
France – €500 million added to French defence
spending
France added €3.9 billion to its 2016-2019 defence budget
following the January 2015 attacks on Charlie Hebdo. After the
November 2015 attacks, IHS estimates that a further €500 million
will be added to French spending. The 2016 budget created 2,300
defence jobs rather than cutting 7,500.
“Despite these additions, France’s defence budget will continue
to fall as a percentage of GDP from 2.2 per cent in 2005 to 1.94
percent of GDP in 2016, slightly below NATO guidelines,” McGerty
said.
Germany – spending back to 2009 levels by 2017
Defence spending in Germany grew by almost 5 percent annually
between 2005 and 2009, increasing from 1.1 percent to 1.3 percent
of GDP. The 6 percent contraction in Germany’s economy in 2009 saw
spending falter over the last five years.
“Despite an unfavourable international environment, Germany’s
economic recovery remains on path and this gradual recovery
combined with a deteriorating security environment resulted in a
steadily improving finance plan for defence in Germany,” McGerty
said.
The 50th Finance Plan effectively brings spending back up to
2009 levels by 2017, reversing the cuts made over the last five to
six years. “The defence budget is now holding steady at around 1.12
percent of GDP,” McGerty said. “While this is well below the NATO
commitment to spend 2 percent of GDP on defence, it is a
significant improvement over previous finance plans that would have
seen German defence spending fall to 0.9 percent of GDP.”
Eastern Europe – defence spending soaring
“Defence spending in Eastern Europe is soaring,” McGerty said.
“Trends have altered significantly since the Russian annexation of
Crimea and defence budgets have already recovered to pre-financial
crisis levels as fiscal conditions have improved.”
Spending is expected to reach around $30 billion by the end of
the decade. Poland and Greece account for 53 percent of the total,
despite the Greece budget being down 8 percent in 2015. Bulgaria,
Czech Republic, Estonia, Latvia, Lithuania, Romania and Slovakia
are all targeting defence spending to be 2 percent of GDP, in line
with NATO guidelines.
About the IHS Jane’s Annual Defence Budgets Report
To learn more about IHS Jane's Defence Budgets visit
www.ihs.com/jdb.
The IHS Jane’s Annual Defence Budgets Report is the world’s most
comprehensive, forward-looking study of government’s defence
budgets. Tracking 99 percent of the global defence expenditure from
104 of the world’s largest defence budgets, data is compiled from
IHS Jane’s Defence Budgets online solution platform. It includes
five-year forecasts, historical data, budget charting, trend
evaluation and in-depth analysis by country. In this study, values
are based on constant 2015 US dollars.
About IHS Jane’s
(www.janes.com)
IHS Jane’s, part of IHS Inc. (NYSE: IHS), is the leading open
source information provider and conference organiser on defence,
international risk and national security to governments,
militaries, industries and academia around the globe. IHS is the
leading source of insight, analytics and expertise in critical
areas that shape today’s business landscape. IHS has been in
business since 1959 and became a publicly traded company on the New
York Stock Exchange in 2005. Headquartered in Englewood, Colorado,
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nearly 9,000 people in 33 countries around the world.
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IHS Inc. All rights reserved.
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