Defense spending down globally due to pandemic, study findsNews
June 11, 2020
SANTA CLARA, Calif. Defense spending during and post the COVID-19 pandemic under three scenarios -- gradual containment, severe pandemic, and global emergency -- will either stagnate or decline as governments around the world allocate funds to contain the pandemic and reactivate the economy, according to a new study from Frost & Sullivan, "Post-pandemic Growth Opportunity Analysis of the Defense Industry."
Under the severe pandemic scenario, defense spending will stagnate at current levels for the short term, during 2020 and 2021; in the global emergency scenario, defense spending will reduce, although this reality will depend mainly on global and regional political conditions. The study authors assert that in this case, spending will be cut by at least 10%, as has been seen during past situations.
“The decline in GDP and the increase of budget deficits would have an impact on defense spending, but the effect would be lower than other industries,” said Alexander Clark, Aerospace & Defense Research Analyst at Frost & Sullivan. “Additionally, governments across the world will promote investments for national security and as potential investments for export revenue.
“With increasing geopolitical tensions, the regional defense spending ratio will remain unaffected as the underlying political factors continue to remain constant. Further, the United States, Asia and Europe, respectively, will remain the biggest consumers of defense products.”
The study asserts that players in the defense market are likely to attempt to increase revenue by redesigning their strategies and customer-engagement models, including such moves as pursuing mergers and acquisitions; focusing on vertical integration; developing competencies in robotics and artificial intelligence, and diversifying into products that protect from chemical, biological, radiological and nuclear (CBRN) agents.
For additional reading, visit the Frost & Sullivan website.