The GCC defense market is anticipated to register a CAGR of over 2%, during the forecast period, 2020-2025.

  • The existing geopolitical tensions between the GCC countries are forcing the armies to concentrate on strengthening their military power, thereby, attracting investments in the defense sector.
  • The presence of high defense spending countries and the existence of high wealth in the region are expected to drive the growth of the market, during the forecast period.
  • Furthermore, the necessity of improving the local defense manufacturing firms is being realized by the countries in the region. The efforts of these countries in this regard are expected to generate opportunities for the market in the future.

Key Market Trends

Procurement of Air-based Vehicles Expected to Drive the Market Revenues during the Forecast Period

  • Although the countries in the region face threats from the sea, they need to improve their air-based surveillance and defense capabilities. The recent imposition of air, land, and sea blockade on Qatar by the Arabian countries, like Saudi Arabia, the United Arab Emirates (UAE), Bahrain, and Egypt, is worsening the friendly relations within the region.
  • In the wake of all these events, these counties are enhancing their air-based defense strength. In May 2015, the Government of Qatar signed a USD 7 billion deal with France for the acquisition of 24 Dassault Rafael fighter jets, and in December 2017, Qatar ordered additional 12 Rafael fighter jets. In February 2019, the first Rafael fighter jet was delivered to the country. In December 2017, BAE Systems, and the government of Qatar signed a deal valued approximately Euro 5 billion for the supply of 24 Typhoon Eurofighter aircraft, with delivery expected to commence in late 2022.
  • Moreover, in June 2017, the United States and Qatar signed a deal for the purchase of F-15 fighter jets, with an initial cost of USD 12 billion, which was expected to improve the air support mission capabilities of Qatar. The Hawk, an advanced jet trainer, produced by BAE Systems PLC, is operated in Saudi Arabia, Oman, Bahrain, Kuwait, and the United Arab Emirates.
  • Since the end of 2017, BAE Systems delivered around 20 Hawk AJTs to Saudi Arabia. Recently, Qatar also completed negotiations with BAE Systems, to procure Hawk trainers. Additionally, Kuwait, which has a comparatively fewer military aircraft strength in the region, started focusing on developing the capabilities of its air-based vehicles. In the context of all these events, the market for air-based vehicles is expected to expand at a high pace in the GCC during the forecast period.

Saudi Arabia to Dominate the GCC Defense Market

  • The military spending in Saudi Arabia is expected to increase, owing to the ambitions of the country to expand its armed forces, due to increasing conflicts in the Middle-East and North African region. In 2018, the Saudi Arabian defense budget stood at USD 67.6 billion, making Saudi Arabia the third-largest defense spender worldwide, after the United States and China.
  • To increase dominance in the region, Saudi Arabia has been investing heavily in the defense sector. For instance, in 2017, the country signed a deal with the United States for purchasing arms worth USD 110 billion immediately and USD 350 billion over the ten years. The purchase included tanks, combat, ships, missile defense systems, and air force modernization, as well as radar, communications upgrades, and cybersecurity systems.
  • Defense spending of Saudi Arabia may continue to remain highest among GCC nations, due to the country’s involvement in military conflicts in the Middle-East and African region, like the ongoing civil war in Yemen, which was started in 2015. Although Saudi Arabia has been trimming down its annual defense budget, since 2015, to divert resources toward education, it is still the most significant defense spender among the GGC nations.

Competitive Landscape

  • Lockheed Martin Corporation, Raytheon Company, BAE Systems, and Rheinmetall AG were some of the foreign players that dominated the GCC defense market in 2019. However, the countries in the region are currently focusing on developing their indigenous manufacturing capabilities.
  • For instance, Saudi Arabia plans to make its publicly held defense manufacturers hold more than 50% of its defense revenue share by 2030. These initiatives may reduce the market share of foreign companies during the forecast period.

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