Saudi Arabia, UAE may raise defense spending amid regional tension: Deloitte

Saudi Arabia and the United Arab Emirates are among nations expected to increase spending on buying next-generation military equipment amid rising regional tension and armed conflicts in the Middle East, according to a study by U.S.-based consultancy firm, Deloitte.

The kingdom’s military spending alone increased 17 percent in 2014 to $80.8 billion, data from the Stockholm International Peace Research Institute (SIPRI) showed in April.

This is counter to the global trend, Deloitte says. Overall global defense spending is declining, resulting mainly from reduced armed conflict in Iraq and Afghanistan, and affordability concerns in many traditional militarily active governments.

The other high defense spenders include India, South Korea, Japan, China, and Russia.

“Many of these countries have produced the incremental wealth necessary to equip their militaries with modern defense platforms and technologies,” Deloitte said. “Some of these same countries have threats on their borders or in their geographies, all of which is contributing to an expectation of increased defense spending in those countries.”

On the other hand, the commercial aerospace sector is expected to sustain its significant revenue and earnings growth in 2015, driven by rising passenger travel demand and production of next generation fuel-efficient aircraft, the report added.

The accelerated replacement cycle of obsolete aircrafts with next generation fuel-efficient carriers and growing passenger travel demand, particularly in the Middle East and the Asia-Pacific region.

In Saudi Arabia, air passenger traffic increased 10 percent last year, according to official figures. Saudi Airlines has placed an order for 50 commercial aircrafts worth $8 billion during the recent Paris Air Show, according to MEED. Qatar Airways has ordered 14 Boeing planes worth $4.8 billion.