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Saudi Arabia Defense Market, Budget Assessment and Drivers 2022

  • Saudi Arabian defense expenditure declined from $64.5 billion in 2018 to $45.6 billion in 2022, reflecting a negative CAGR of 8.3% during 2018–22
  • The loosening of COVID–19 induced lockdown and the increase in oil price because of the uncertainty caused by the ongoing Russo–Ukrainian war have escalated the energy prices with Brent crude and WTI crude trading at $110.7 and $108.2 per barrel respectively as of May 5, 2022 which is expected to increase oil prices to provide greater resources to the defense sector over the forecast period
  • Saudi Arabia’s defense expenditure is projected to grow at a CAGR of 2.1% to value $56.5 billion by 2027

Defense Budget Forecast

Saudi Arabian defense expenditure declined from $64.5 billion in 2018 to $45.6 billion in 2022, reflecting a negative CAGR of 8.3% during 2018–22. The decline in growth is primarily attributed to the volatility in the global oil market, owing to the price war between Saudi Arabia and Russia and the erosion in global demand for oil due to the COVID–19 virus. As a result of a weak economic climate, the country's defense expenditure declined in 2021 as against 2020 and is valued at $46.7 billion which further declined to $45.6 billion. This is an annual Y–o–Y decline of 2.3% over the previous year (2021) and is the fourth continuous Y–o–Y contraction in defense spending starting 2019. However, the loosening of COVID–19 induced lockdown and the increase in oil price because of the uncertainty caused by the ongoing Russo–Ukrainian war have escalated the energy prices with Brent crude and WTI crude trading at $110.7 and $108.2 per barrel respectively as of May 5, 2022. Hence, Saudi Arabia is expected to increase oil prices to provide greater resources to the defense sector over the forecast period. Against the backdrop of a steady projected recovery in the country's fiscal posture, Saudi Arabian defense spending is anticipated to increase from $51.9 billion in 2023 to $56.5 billion in 2027, reflecting a CAGR of 2.1%.

Drivers of Defense Expenditure

As per GlobalData’s Saudi Arabia’s Defense Market 2022-2027 (free) report, Iranian militarization, and development of the domestic industry are the primary drivers of Saudi Arabia’s defense expenditure.

Saudi Arabia has traditionally had an inimical, hostile relationship with Iran. The country is threatened by the Iranian nuclear program and is perpetually targeted by the arsenal of Iranian ballistic missiles. The country is thus expected to invest in a robust defense posture. The continued Iranian support for Houthi rebels also threatens the country.

Saudi Arabia has set itself an ambitious target of developing defense industrial capability so as to source 50% of its defense requirements internally from domestic suppliers.

Access the full report here.

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