BMI View: The United Stated defence military complex is the biggest in the world. United States military expenditure is the highest in the world , driv en the by government commitment to various peace keeping missions and large number of armed force deployments, in addition to a sizeable domestic terrorism threat . We believe that the United States defence budget will increase and be re- oriented to take account of the threat posed by Islamic State of Iraq and Syria (ISIS) and to address a diverse range of international commitments.
United States faces a complex security scenario: ISIL is posing a major security risk in the Middle East to the United States and its allies. United States also sees necessary to maintain military presence in Afghanistan until at least December 2015. These two facts also increase the potential of domestic terrorism. The need to contain Russia's initiatives in Europe determines its participation in permanent military exercises and educational exchanges with Ukraine. Finally, focus remains on the Asia Pacific region and the "pivoted" stance the US is implementing, trying to balance China's influence, through engaging in countless military exercises and defence cooperation initiatives with regional players. The mentioned security trends will drive US Defence expenditure in years to come.
Although initially was expected that US Congress would contract the defence budget in their time of austerity, the aforementioned security threats establish that 2015 will see a considerable increase in defence spending. We expect a 10.9% increase in relation with 2014. At the moment cost- saving measures have taken place but we expect that this will provide only minor inconveniences in terms of investments and procurements.
United States remains the biggest, most significant and profitable market in the world of defence, military and security goods and services and we expect it to hold this position in the short and middle term period. In 2015 we expect to see a rising defence budget of USD725bn, a USD71bn increase from 2014. The great amount of resources available for military spending have determined the existence of a strong and very competitive and sophisticated local market where there is little space for foreign companies to penetrate. The aforementioned expenditure is driven by acquisitions in equipment for military combat, missile defence, cyber defence, and nuclear deterrence. United States is also investing to assure the use of space, especially in relation to the expansion of capabilities to protect and improve the resilience of US systems.
The need to resolve a diverse range of conflict situations will in our view stimulate procurement plans as the country will now be able to focus on obtaining arms and technologies that might have been previously decided against due to austerity measures. The main focus of these procurements will be the F- 35 Lightning II Joint Strike Fighter Program. After years of setbacks, in July 2015 the United States Marine Corps stated that a squadron of 10 F- 35B Lightning II aircraft is ready for international deployment. The Marine Fighter Attack Squadron 121 is the first squadron in history to become operational with an F-35 variant.
In July 2015 was announced that by 2018 the US Army is expected to downsize from 490,000 to 450,000 personnel, cut 17,000 civilian workforces and reduce the size of some brigade combat teams.
In March 2015 high rank Navy and Air Force officials stated at a House Armed Services Committee hearing that the president's budget request for fiscal year 2016 will support the modernization of combat aviation initiatives. The mentioned budget proposal centres on modernizing Air Force capabilities while investigating revolutionary future technologies.
In January 2015 the Department of Defence released new updated instructions for acquisitions system (Department of Defence Instruction 5000.02, Operation of the Defence Acquisition System).
Key BMI Forecasts
Over 2015 defence expenditure will reach 4% of United States GDP (an increase of 10.9% over 2014 levels), reaching USD725bn.
Defence imports will reach USD5572mn over 2015 of which USD3639mn will come from arms and ammunition.
Defence exports will reach USD 8572mn of which USD4573mn will come from arms and ammunition.
We expect in the long term future to see a sustained defence expenditure level of around 4% of GDP.