Mena defence budget to rise 3.3% in 2023 on higher oil revenue, report says

Region's military expenditure is projected to reach $238.2bn this year

The new Caracal light machine gun on display at the International Defence Exhibition in Abu Dhabi. Victor Besa / The National

The defence budgets of Mena countries are expected to increase by 3.3 per cent this year as higher oil revenue drives regional governments' spending on arms, a report has said.

The region's defence expenditure is projected to hit $238.2 billion this year, up from $230.6 billion in 2022, data from defence intelligence company Janes showed.

Defence investment activities in the Mena region are expected to grow 2.6 per cent annually in 2023 to $43.5 billion, which is included in the total defence budget.

"In 2023, the delayed fiscal impact of increased oil revenues is forecast to drive a 3.3 per cent growth in defence spending in the region, focused primarily on defence investment activities, adding $8 billion to the region’s annual expenditure," Lea Clamadieu, Middle East analyst at Janes Defence Budgets, told The National.

"Rising oil prices in 2022 benefitted Mena states and, particularly, Gulf countries, easing fiscal pressures and stabilising defence budgets at $230 billion.

"The full effect of the recovery in the price of hydrocarbons, including the surge brought about by Russia’s invasion of Ukraine, was not felt in defence budgets last year, however."

The increase comes after a turning point in 2019 when the region's defence spending dipped.

The Mena region's annual defence spending fell by 7.5 per cent in real terms to $250 billion while investment activities dropped by about 16 per cent annually.

In 2024 and 2025, the region's defence budget is projected to increase, according to data from Janes.

Spending is forecast to increase by 4 per cent a year to $247.7 billion in 2024.

In 2025, the defence budget is estimated to rise 3.9 per cent to $257.3 billion, recovering above 2019 levels but still below the peak recorded in 2017 of $273.9 billion, the data shows.

"Research, development, test and evaluation investments are expected to see the largest proportional increase, driven by the desire of countries like the UAE to develop and improve domestic production capabilities," Ms Clamadieu said.

"Procurement is also expected to rise as countries restart acquisition programmes that had been delayed due to the more austere budgetary environment."

The UAE, the Middle East’s main business centre, is seeking to shore up its defence industry as part of a wider plan to localise military spending and boost domestic manufacturing in priority sectors.

The Emirates is the third biggest spender in the Mena region, with a defence budget estimated by Janes to be worth $25.1 billion in 2022, up 4.4 per cent on 2021.

Despite nominal cuts to defence spending in 2019 and 2020, the UAE’s defence budget remained robust in real terms, and expansion accelerated significantly in 2021 and 2022, notably outpacing the rest of the region.

In 2023, the UAE's military funding is expected to increase further, growing 6.7 per cent annually to $26.9 billion, according to Janes.

Expenditure will rise by 6.2 per cent to $28.5 billion in 2024 and by 2 per cent to $29.1 billion in 2025.

"Resurgent acquisition activities are expected to partly drive defence expenditure until 2025, continuing the high investment growth rates seen in 2021 and 2022," said Ms Clamadieu.