Military Budgets for 3rd to tenth place now and in 2020

The Military Balance is The International Institute for Strategic Studies’ (IISS) annual assessment of the military capabilities and defence economics of 171 countries worldwide.

France and Germany have seen a 25% drop in the value of the Euro since 2014 (1.38 down to 1.1). The Euro is expected to drop another 5% or so relative the US dollar by the end of 2015. The Euro is expected to drop another 10% or so each year from 2016 to 2018. This will drop any eurozone country in any ranking that is stated in US dollars or based on an exchange rate.

The russian ruble has nearly halved its value against the US dollar (from 32 to 1 US dollar to 62 to 1 US dollar). Russia is in the middle of a big military buildup. If the currency had stayed stable it would have meant about a US$100 billion per year military budget in 2016. However, the military budget will instead shrink a bit in US dollar terms.

Saudi Arabia has a peg of the riyal to the US dollar. Saudi Arabia spends abuot 6% of its GDP on its military compared to about 4% for the USA and 2% for China and in the 1% range for Japan and European countries.

Saudi Arabia and Russia are oil and gas dependent economies and it appears there will be prolonged weakness in oil and gas prices. This will limit their economies and limit their future military spending through 2020.

India had a currency hit over a year ago. India appears back to getting pretty good GDP growth and Modi wants to increase India’s military spending. India definitely should be number 3 in military spending by 2020.

Highlights and forecasts from the IHS Defence Budgets Annual Report:

* By 2019, for the first time in history, NATO will not account for the majority of worldwide defence expenditure, having accounted for almost two-thirds of global spending as recently as 2010;

* By 2020, defence spending in Asia Pacific will exceed that of the US, if sequestration continues; at present the US outspends the region by USD170 billion;

* Rapid growth in the Middle East and North Africa will come to an end as oil revenues slump;

* Despite a two percent cut in 2014, the UK resumed its position as the third highest spender on defence above Japan, Russia, and France, due to Russian currency depreciation; IHS has a lower number for Saudi Arabia military spending then IISS.

* Russian defence spending is forecast to reach its peak of USD62.6 billion in 2015;

* India is forecast to become the third largest defence market by 2020.

IHS Janes has an analysis of Five Key Global Defence Budget Trends for 2015 Western defence budgets will fall and Asian budget will increase. Petrostates will stall out.

IHS Janes 2014 defense spending

Country 2014 Defence Budget (USD mn)

1 United States 586,920

2 China         176,252

3 United Kingdom 58,072

4 Japan          54,614

5 Russia         54,404

6 France         52,649

7 Saudi Arabia   48,457

8 India          47,783

9 Germany        42,971

10 Brazil        34,434

11 Australia     32,951

12 Korea, South  32,601

13 Italy         26,939

14 Canada        18,028

SOURCES – The International Institute for Strategic Studies, IHS, google finance