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Oil price to hit Gulf defence spending over next two years
February 22, 2016, 8:57 am

After years of rocketing defence expenditure, the lower oil price is likely to see Gulf governments moderate their military spending over the next two years, according to new research.

IHS Janes has projected that defence spending in the region until 2017 will be “largely flat” at $170 billion.

Saudi Arabia is expected to spend the most in the region over this period. The US-based consultancy pegged the kingdom’s spending in 2015 at $46 billion, giving the country the eighth-largest defence budget in the world.

“Propelled by record energy sector revenues, the Middle East was the fastest growing region globally between 2012 and 2014,” IHS Janes said, in its research.

“But, 2015 saw the first defence budget cuts for a decade as oil prices crashed. We saw the first marginal cuts in 2015, but, those cuts are now expected to deepen in 2016 as states are forced into pursuing fiscal consolidation with more vigour.”

While Qatar, Egypt and Iraq were all among the world’s top 10 fastest-growing defence spenders in 2014, their places are expected to be taken by Iran and Tunisia this year.

However, IHS Janes said there was little chance that defence expenditure in the region would actually be cut, thanks to security to concerns.

“Nevertheless, heightened regional security concerns are expected to ensure that defence budgets are protected in relative terms,” the research said.

“As the Gulf States take a more active role in regional security, we will likely see upward pressure on defence budgets in the medium to long term. As a result defence spending in the region is expected to be largely flat at $170 billion over the next two years with a major downturn seen as unlikely.”

Source: Arabian Business

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