Market Trends of GCC Defense Industry
This section covers the major market trends shaping the GCC Defense Market according to our research experts:
Procurement of Air-based Vehicles is Expected to Drive the Market Revenues during the Forecast Period
The countries in the GCC region are rapidly expanding their aerial capabilities due to their current geopolitical tensions in the Middle Eastern region and the involvement of the countries in foreign conflicts. The countries are robustly investing in the modernization of their old and aging military aircraft fleet with new generation aircraft. For instance, in December 2021, the United Arab Emirates signed an agreement with Dassault Aviation for the procurement of 80 Rafale F4 for the United Arab Emirates Air Force & Air Defence (UAE AF & AD). The country also signed a contract for the procurement of 12 Caracal (H225M) military transport helicopters. Similarly, in 2019, Lockheed Martin announced that the company began the construction of the first F-16 Block 70 for the Royal Bahraini Air Force. The construction was initiated as part of the contract signed between the parties for the construction and delivery of 16 new F-16 Block 70 aircraft. Nevertheless, due to the COVID-19 pandemic, the introduction of new F-16 aircraft was delayed by a year, and it is now planned to introduce by 2024.
In addition to the aircraft fleet, the countries are also introducing new generation unmanned aerial vehicles (UAVs) to support intelligence, surveillance, and reconnaissance (ISR) missions. In April 2020, Saudi Arabia's General Authority for Military Industries (GAMI) announced that the country was procuring six unmanned systems from a local firm, Intra Defense Technologies. This first shipment was scheduled for delivery in 2021, and a further 40 systems were expected by 2026. The drone is expected to be the Karayel tactical UAV, developed by Turkey's Vestel. Such developments are anticipated to boost the growth of the market during the forecast period.
Saudi Arabia is Expected to Dominate the GCC Defense Market
Saudi Arabia currently accounts for a major market share due to the highest military spending of the country in the Middle Eastern region. The country has reduced its defense spending and budget allocation since 2015, primarily due to downward pressure from declining energy prices and more focus on the education sector. Nevertheless, according to SIPRI, the military spending of the country in 2020 was USD 57 billion, which was approximately 8.4% of the country's GDP. In addition to this, in December 2021, the government announced its plan to decrease its military budget for 2022 by 10% compared to 2021. The defense budget for 2022 is expected to be SAR 171 billion (USD 46 billion). Despite the decrease in the overall military spending of the country, the armed forces are robustly investing in the modernization of their military equipment like weapon systems, aircraft, and counter-terrorism equipment, among others. For instance, in March 2021, Saudi Arabia signed two contracts worth more than USD 150 million with Lockheed Martin Corporation for UH-60M Black Hawk helicopters. Under one contract, the company received an order for four helicopters from the country, which are expected to be delivered in June 2022 (contract modification to the previous contract signed in 2017). Another contract was awarded to deliver 25 modified UH-60M helicopters for the Saudi Arabian National Guard (SANG). The contract is scheduled to be delivered through October 2024. With these two orders, the order book for UH-60M helicopters has increased to more than 110. Currently, as part of its Vision 2030, the country is reducing its dependence on defense imports and strengthening its local military manufacturing capabilities by partnering with international companies. Such support initiatives of the government for the development of the local defense manufacturing industry are expected to accelerate the growth of the defense market in the country during the forecast period.
