Defence spending grew one per cent to $1.57 trillion (£1.2 trillion) after “lacklustre” outlays last year, IHS Markit estimated in its Jane Defence Budgets Report, an analysis of 105 countries that span 99 per cent of global expenditure.
Fenella McGerty, principal analyst at IHS, said: “Defence spending returned to a healthy rate of growth in 2016, kicking off what we expect to be a decade of stronger global defence spending. Defence spending should recover to pre-financial crisis levels by 2018.”
The US is set to remain the world’s leader in defence spending this year, splashing out an estimated $622 trillion, making up around 40 per cent of total global expenditures.
The election of political outsider Donald Trump is expected to boost investment to the US department of defense with "much needed" funds in the coming years.
However, there was a shake-up in the top five spenders this year, as India pushed its way into fourth position (from sixth in 2015) and pushed out Russia. Last year represented a “zenith” for Russian defence outgoings for “the foreseeable future”, IHS said.
“Procurement spending has been constrained in India over the last three years as personnel costs have increased,” said Craig Caffrey, principal analyst at IHS Caffrey said. “However, what we expect to see from 2017 onwards is a military focused on modernisation. India needs new equipment to fulfil its modernisation drive. Over the next three years, India will re-emerge as a key growth market for defence suppliers.”
Over the next 10 years a key driver will be the Asia-Pacific region, IHS has forecast, where a gradual shift in focus from territorial defence to power projection could prompt even faster budget growth in the medium term. China’s defence budget alone will almost double by 2020 from 2010 levels, from $123bn to $233bn.
This will be about four times bigger than the UK’s and more than the entire Western European regional defence spend combined.