Gulf countries' defence spending is expected to recover to pre-pandemic levels by 2024 following declines starting this year due to the impact of low oil prices and the Covid-19 crisis, according to defence intelligence specialist Janes.
Defence expenditure in the Gulf will rebound as government revenues increase due to improvements in regional economies, Janes said in a report on Thursday.
"Defence budgets will return to pre-pandemic levels by 2024, with procurement expenditure expected to reach 2019 levels by 2022,” Charles Forrester, lead analyst at Janes, said.
Defence expenditure in the Gulf is projected to drop 9.4 per cent in 2021 to $90.6 billion before falling to $89.4bn in 2022, the report showed.
"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," Mr Forrester said. "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."
During collapses of oil prices in 2014 and 2016, governments wielded stronger financial reserves while security issues in Iraq, Syria and Yemen meant that governments were able to "ring-fence" defence expenditure from any significant cuts at the time, he said.
However, defence expenditure may not be so immune this time as some countries in the region were already facing fiscal deficits at the start of 2020, he said.
Last year, Gulf defence expenditure rose by 5.4 per cent to $100bn, up from $94.9bn in 2019, according to the Janes report.
Gulf countries' procurement expenditure is forecast to decline slightly to $13.25bn in 2021, following a 4.5 per cent surge in 2020.
“The long-term procurement budget forecast will be shaped by the cyclical nature of some countries’ defence procurements coming to an end," Mr Forrester said. Some countries "have capability requirements that have been long-delayed, and it may only be once the economic recovery is underway that these are signed off.”
The push by Gulf countries, such as the UAE and Saudi Arabia, to develop their domestic military industries and localise production will lead to short-term changes in the region’s defence equipment procurement, the report showed.
"Saudi Arabia and the UAE have both clearly identified localisation of defence equipment production and development in their offset and procurement regulations," Mr Forrester said. "Building capacity in-country helps to reduce the costs for through-life support of more complex systems, and also reduces the downtime for more advanced maintenance operations if there is a support infrastructure in place."
The UAE and Saudi Arabia are developing their military production capabilities to localise procurement and reduce reliance on foreign suppliers. The move is aimed at diversifying economies away from oil, nurturing local manufacturing capabilities and creating more jobs. It will also drive sectors like maintenance and repair operations where local capabilities exist.
The normalisation of ties between the UAE, Bahrain and Israel last September is also expected to spur sales of new and advanced equipment to its signatories, according to the report. The establishment of diplomatic ties will help increase competition in the Gulf equipment market with technology that is compatible with previously acquired Western systems.
“Israeli capabilities in a variety of key advanced technological areas, such as UAVs, air defence and cybersecurity are all key areas of interest for the Gulf’s militaries," Mr Forrester said. "Financial and technical collaboration in areas such as AI, big data analytics, and cybersecurity will help to both enable and enhance capabilities, but also address mutual threats through complementary development.”
Janes' outlook on the Gulf defence spending and procurement comes ahead of next week's International Defence Exhibition and Conference, the biggest defence expo in the Middle East, as Abu Dhabi returns to in-person events amid the Covid-19 pandemic.
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
Indoor Cricket World Cup
Venue Insportz, Dubai, September 16-23
UAE squad Saqib Nazir (captain), Aaqib Malik, Fahad Al Hashmi, Isuru Umesh, Nadir Hussain, Sachin Talwar, Nashwan Nasir, Prashath Kumara, Ramveer Rai, Sameer Nayyak, Umar Shah, Vikrant Shetty
MATCH INFO
Scotland 59 (Tries: Hastings (2), G Horne (3), Turner, Seymour, Barclay, Kinghorn, McInally; Cons: Hastings 8)
Russia 0
Brief scores:
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Xhaka 25', Lacazette 55', Ramsey 79', Aubameyang 83'
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Toss: Northern Warriors, elected to field first
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Roy 60 not out, Rutherford 47 not out
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Simmons 44; Yamin 4-4
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Man of the Match: Kaide Gordon (Liverpool)
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Enric Sala is an expert on marine conservation and is currently the National Geographic Society's Explorer-in-Residence. His love of the sea started with his childhood in Spain, inspired by the example of the legendary diver Jacques Cousteau. He has been a university professor of Oceanography in the US, as well as working at the Spanish National Council for Scientific Research and is a member of the World Economic Forum’s Global Future Council on Biodiversity and the Bio-Economy. He has dedicated his life to protecting life in the oceans. Enric describes himself as a flexitarian who only eats meat occasionally.
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Started: November 2017
Founders: Mounir Nakhla, Ahmed Mohsen and Mohamed Aboulnaga
Based: Cairo, Egypt
Sector: transport and logistics
Size: 150 employees
Investment: approximately $8 million
Investors include: Singapore’s Battery Road Digital Holdings, Egypt’s Algebra Ventures, Uber co-founder and former CTO Oscar Salazar
