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Decreasing Defense Expenditure: Key Trends and Future Outlook

Decreasing Defense Expenditure: Key Trends and Future Outlook

Summary

Global defense expenditure during 2017-2021 is expected to either increase, in comparison to the past four years. India expects to significantly increase its defense expenditure due to strategic threats triggered by ISIS and China. Accordingly, China announced plans to boost its defense budget over the next four years due to rising territorial disputes in the East and South China seas.

Evidencing the trend, Hindustan Aeronautics Limited (HAL) signed a US$8.5 Million contract with Saab, the aerospace and defense company based in Sweden, for the maintenance and modernization of the electronic warfare self-protection system of the Dhruv Advanced Light Helicopter.

Increasing national debt, reducing the deficit, and emphasize on indigenous manufacturing, are major factors influencing defense budget cuts during 2017-2021. Moreover, the impact procurement of advanced technologies will remain a key challenge for defense industry manufacturers/suppliers in the aftermath of defense budget cuts.

Furthermore, the industry is expected to lose jobs, particularly defense contractors, due to a decrease in the purchase of equipment, supplies, and services in the aftermath of defense budget cuts. Brazil and South Africa are expected to exhibit the highest defense budget cuts during 2017-2021, due to economic crisis, political uncertainty, and sharp fall in oil prices. Several defense organizations have increased their expenses towards renewable energy such as wind and solar power, to combat rising oil prices, budget cuts, and climate change policies

New facility acquisition, recruitment, and machinery and equipment purchase divisions are likely to witness the highest budget cuts over the next four years. Factors such as changes in the US DoD administration, coupled with uncertainty surrounding the undefined strategic requirements of the new administration, have put a break on the new facility acquisition related activity in US DoD. Furthermore, rising macroeconomic factors and geo-political uncertainties, namely Brexit, and volatility in the oil and currency markets is halting spending plans in recruitment divisions.

The report “Decreasing Defense Expenditure: Key Trends and Future Outlook” result of an extensive survey drawn from our exclusive panel of industry executives. This report is based on the surveyed opinions and expectations of 103 global defense industry executives.

In depth, this reports insights into -
- Examine the change in global defense expenditure during 2017-2021 and the areas likely to witness the decrease in defense expenditure during 2017-2021.
- Highlights the factors which will influence defense budget cuts during 2017-2021 and the key challenges the manufacturer/supplier will be facing aftermath of defense budget cuts.
- Provides information about the countries projected to exhibit highest defense budget cuts during 2017-2021 and how the budget cuts will impact the revenue generated by defense suppliers.
- Covers cost saving targets owing to clean technology initiatives during 2017-2021 and how the demand for new technology equipment is going to change over the next five years.

Companies mentioned in this report: Hindustan Aeronautics Limited, Saab, Lockheed Martin

Scope

- Over one quarter of executives from medium sized companies plan to reduce their defense expenditure in the areas of air and naval forces
- The highest percentage of respondents highlight new facility acquisition division to witness increased defense budget cuts over the next four years
- During 2017-2021, rising national debt is highlighted as one of the key factors influencing defense budget cuts in Asia-Pacific and the Rest of the World
- Overall, 65% of executives noted that the procurement of advanced technologies will be impacted in Europe, in the aftermath of defense budget cuts
- 35% of industry executives from the Rest of the World state no change in budget cuts in 2017-2021, due to the implementation of clean technology
- One-fourth of executives from large companies expect a 10-25% increase in the demand for new technology equipment over the next five years

Reasons to buy

- Helps organizations to take steps to cut down impact (loss) due to defense budget cuts
- Helps to manage cost by providing information about the challenges faced by suppliers aftermath of defense budget cuts
- Provides information about change in demand for new technologies aftermath of defense budget cuts
- Helps to understand the defense divisions that are likely to expect major reduction in budget during 2017-2021


Introduction
Definitions
Methodology and sample size
Respondent profile
Decreasing Defense Expenditure: Impact of budget cut and factors influencing defense budget cut
Change in global defense expenditure 2017-2021
Key defense areas likely to witness decrease in defense expenditure
Defense divisions expected to witness major change in budget
Key factors likely to influence the defense budget cuts in 2017-2021
Decreasing Defense Expenditure: key challenges and countries likely to witness highest defense budget reduction
Key challenges to be faced by manufacturer/supplier aftermath of defense budget cuts
Region wise change in defense budgets in 2017-2021
Countries projected to witness highest defense budget cuts in 2017-2021
Comparison of defense budget cuts from 2012-2016 to 2017-2021
Decreasing Defense Expenditure: Critical impact on suppliers revenue and projected change in demand for new technology
Critical impact on suppliers’ revenue
Introduction of clean technology during budget cuts
Change in demand for new technology equipment
Measures taken by organizations to combat defense budget cuts
Appendix
List of Figures
Figure 1: Change in global defense expenditure during 2017-2021- Overall & Region
Figure 2: Change in global defense expenditure during 2017-2021- By Company Types
Figure 3: Key defense areas likely to witness decrease in defense expenditure- Overall
Figure 4: Key defense areas likely to witness decrease in defense expenditure- By Region
Figure 5: Key defense areas likely to witness decrease in defense expenditure- By Company Types
Figure 6: Defense divisions expected to witness major change in budget- Overall
Figure 7: Defense divisions expected to witness major change in budget- By Region
Figure 8: Defense divisions expected to witness major change in budget- By Company Types
Figure 9: Key factors likely to influence the defense budget cuts in 2017-2021- Overall
Figure 10: Key factors likely to influence the defense budget cuts in 2017-2021- By Region
Figure 11: Key factors likely to influence the defense budget cuts in 2017-2021- By Company Types
Figure 12: Key challenges to be faced by manufacturer aftermath of defense budget cuts- Overall
Figure 13: Key challenges to be faced by manufacturer aftermath of defense budget cuts- By Region
Figure 14: Key challenges to be faced by manufacturer aftermath of defense budget cuts- By Company Types
Figure 15: Region wise change in defense budgets in 2017-2021- By Region
Figure 16: Region wise change in defense budgets in 2017-2021- By Company Types
Figure 17: Countries projected to witness highest defense budget cuts in 2017-2021- Overall
Figure 18: Countries projected to witness highest defense budget cuts in 2017-2021- By Region
Figure 19: Countries projected to witness highest defense budget cuts in 2017-2021- By Company Types
Figure 20: Comparison of defense budget cuts from 2012-2016 to 2017-2021- Overall and Region
Figure 21: Comparison of defense budget cuts from 2012-2016 to 2017-2021- By Company Types
Figure 22: Critical impact on suppliers’ revenue- Overall & Region
Figure 23: Critical impact on suppliers’ revenue- By Company Types
Figure 24: Impact of clean technology during budget cuts in 2017-2021- Overall
Figure 25: Impact of clean technology during budget cuts in 2017-2021- By Region
Figure 26: Change in demand for new technology equipment over next five years- Overall & Region
Figure 27: Change in demand for new technology equipment over next five years- By Company Types

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