Budgets on the Battlefield: Analysing the Surge in Global Defence Spending

Defence budgets are on the rise due to the increase in armed conflicts, both historic and more recent, around the world. Currently, there are over 110 wars taking place, including over 45 in the Middle East and North Africa, more than 35 in the rest of Africa, 21 in Asia, seven in Europe, and six in Latin America. Here we look at how much is being spent and on what, as well as looking at what’s causing these conflicts, and what it means for the future of global security.

Global defence spending

There are few countries around the globe which haven’t responded to world events by increasing their defence budget. Estimates on exactly how much is being spent on defence vary but range from $573 billion to over $2,012 billion, with the USA, China, Russia, India and Saudi Arabia being responsible for almost 63% of global military spending. Looking ahead, the size of the global defence market looks set to reach $3,686.9 billion by 2032.

North America led spending in 2023 with a total spend of $943 billion. The USA spent most, with expenditure of $916 billion, amounting to over 40% of the total military spend in 2023.

Continuing tensions in East Asia put this region next in the league table, with China spending $296 billion on defence – a 60% increase over ten years.

Russia was third in terms of total defence spending, with a budget of $109 billion. 

Central and Western Europe spent around $407 billion on defence, due largely to the Russia-Ukraine war. Ukraine in particular spent $64.8 billion, or 37%, of its GDP on its military – the highest of any other country. 

Countries in the Middle East are also spending more on defence, with Saudi Arabia leading the spend at $75.81 billion, followed by Israel ($27.5 billion), Qatar ($11.27 billion), Kuwait ($7.76 billion), Oman ($5.85 billion), Jordan ($2.45 billion), Bahrain ($1.84 billion) and Iran ($1.03 billion), reflecting the growing tensions and instability in the region. 

Eastern European countries spent around $181 billion on defence in 2023, followed by South Asian ones ($98.2 billion).

Countries in South America spent $50.7 billion, with those South East Asia spending slightly less, at $47.8 billion.

Oceania spent $35.5 billion, North Africa $28.5 billion, Sub-Saharan Africa $23.1 billion, Central American and the Caribbean $14.7 billion, and Central Asia $1.8 billion.

What is the money buying?

Global tensions and increased conflict has seen a huge depletion of the stock of weapons countries hold and, with renewed demand, combined with an upsurge of conflict after the COVID-19 pandemic which disrupted investment, supply chains and production, defence spending is now on the increase again.

Defence has changed over recent years and no longer relies on the artillery, tanks and aircraft that were used to win conflicts in the 20th century. Today, technology has inspired equipment like military drones, advanced materials, automation and robotics, Intelligence, Surveillance, Cyber Security, Target Acquisition, and Reconnaissance (ISTAR) technologies, the use of AI, space-based defence activities and electric military vehicles, highlighting a significant transformation within the defence industry. 

Some of the most important advanced applications of technology in defence include:

Drones – with a wide range of applications including intelligence, surveillance and reconnaissance activities (ISR), target identification and tracking, missile deployment, and suppression of air defence and communication systems, drones are becoming increasingly cost-effective to produce and have the potential to provide around 80% of the unmanned or remotely-piloted air capability by 2030. The drone and counter-drone market is expected to grow to around $16.33 billion by 2028.

AI – already used for failure prediction and mine hunting, AI has the potential to analyse intelligence data, test military products and optimise training, it’s estimated that the market for AI within the defence industry will be worth around $17.65 billion by 2028.

Cybersecurity – a threat to civilian as well as military targets, cybercrime may cost the world economy $23.84 trillion by 2027. Cybersecurity assists with repelling disruptions such as attacks on communication systems or electric grids and to reflect its importance, the US cyber command has increased its budget to $1.1 billion to train personnel and increase intelligence capabilities.

An uncertain world

The reasons behind the massive increases in defence spending around the world are complex and include:

Existing and new conflicts – from the increased hostilities in Gaza to Russia’s invasion of Crimea, from territorial disputes in the South China Sea to instability in Haiti, conflicts are on the rise the world over. Many of these are waged between criminal, terrorist or political groups but many also involve nation states themselves. Drivers for conflict include regional tensions, a breakdown of the rule of law, state institutions that have been neglected or are lacking in resources and the black economy often heightened by climate change. 

Organised crime – this includes urban crime and domestic violence and kills more people in the world than wars themselves. Murder accounts for the vast majority of deaths. Gang violence and organised crime are most prevalent in the Americas, is exacerbated by political unrest and affects almost half the world’s population. Women and girls are particularly affected by murders, being the main victims of misogyny, inequality and a lack of equal opportunities.

Extremism and terrorism – almost all terrorist activities take place in countries which experience conflict, mostly taking place in the Middle East and North- and Sub-Saharan Africa. Terrorism is linked to social alienation, lack of opportunities and whether a country is involved in external conflict. Extremist xenophobic groups on the right have risen in recent years in Europe and North America, primarily driven by social media which allows dissemination of propaganda.

Cyber threats – the development of AI has made it easier for criminals to commit cyber crimes, making their discovery harder and putting critical systems at risk. Emerging technologies are also making the production of biological weapons easier, threatening humans, crops and livestock, thus increasing food insecurity. Lethal Autonomous Weapons (LAWs) are also being developed, raising concerns over whether they could be utilised without involving human ethics. 

Of course, there are many and various other reasons why conflict has increased over recent years, enhancing the importance of countries’ robust defence capabilities.

The future of global security

In a world of rapidly-changing technological advances, warfare and defence in the future must transform to respond to new threats. A report by KPMG entitled ‘The Future of Defence’ highlights the need for digital agility for success against ever-changing dangers, cooperation between allies, and for countries to accelerate their digital adoption. It focuses on how digital can assist in processing information which will allow decision-makers to respond to real-time decisions, as well as simulation and forecasting to enhance planning. 

Another report, this time by Deloitte, entitled, ‘2025 Aerospace and Defense Industry Outlook’ focuses on five areas in which the defence industry might develop over the next 12 months: the integration of digital technologies in repair and maintenance, the use of AI in developing talent attraction and retention strategies, the continued use of unmanned rocket technologies, flight certification, and correcting the impact on the defence supply chain.

Whatever the future holds, the defence industry will play a key part in the safety and security of all the world’s citizens for the foreseeable future. 

For more detailed analysis of what the future holds for the defence industry, download our Asset, ‘The Future of Defence 2030: Spending Projections and Technological Shifts’ here.

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