The ambitious strategic framework, Vision 2030, announced by Saudi Arabia’s crown prince Mohammad bin Salman to bolster the kingdom’s defense sector with an investment of $50bn to $80bn is expected to drive defense expenditure at a compound annual growth rate (CAGR) of 2.1% from $51.9bn in 2023 to $56.5bn in 2027, says GlobalData, a leading data and analytics company.
GlobalData’s latest report, ‘Saudi Arabia Defense Market Size and Trends, Budget Allocation, Regulations, Key Acquisitions, Competitive Landscape and Forecast, 2022-27’, reveals that Saudi Arabia’s defense acquisition and R&D spending growth recorded Y-o-Y decline of 2% from $13.1bn in 2021 to $12.8bn in 2022. Saudi Arabia is heavily reliant on oil revenues and was forced to reduce its defense spending in 2019, 2020, 2021, and again in 2022 due to significant erosion in global oil prices.
Akash Pratim Debbarma, Aerospace & Defense Analyst at GlobalData, comments: “The Vision 2030 initiative is not only a strategic move to strengthen armed forces in terms of procuring foreign platforms and weapons but to also boosts Saudi’s indigenous defense industry, allowing it to create jobs locally and to build a robust defense industry. If executed properly, it has the ability to help the kingdom diversify from oil and support the growth required for its long-term goals.”
In line with the Vision 2030 initiative, Saudi Arabia is anticipated to spend around $12bn to procure 44 units of the THAAD system to augment its existing PAC-III units that presently focus on defending against Iran.
Debbarma concludes: “Saudi Arabia had deployed the PAC–III system to defend critical infrastructure and other high-security areas. However, with the introduction of longer-range Iranian missiles, there is a need to procure the THAAD to complement the Patriot systems and form a reliable anti-ballistic missile shield.
“Saudi Arabia will benefit from the recent bans on Russian oil by the EU, and a general increase in oil prices caused by the ongoing Russo–Ukrainian war. This will help Saudi Arabia to have more resources to fund its defense sector over the forecast period, making it easier for the country to stay in line with the Vision 2030.”
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