The shifting military market

In its annual report on global military expenditures, the Stockholm International Peace Research Institute (SIPRI) said on Monday that global military expenditures in 2012 had fallen by 0.5 percent compared to 2011.

Some of the most significant cuts came from the US as it reduced its presence in conflict zones (such as Afghanistan) and reacted to budget cuts in the Defense Department. For the first time since the fall of the Soviet Union, SIPRI says, the percentage of US spending as part of total global military spending has fallen below 40 percent. Despite the drop, the US remains the global leader in military expenditures.

Austerity measures implemented by many European nations have continued to affect their military spending as well. SIPRI reports that 18 of the 31 countries among NATO's European member countries have cut military spending by more than 10 percent since the global financial crisis in 2008.

Germany ranked ninth on the SIPRI list of countries with the highest military spending in 2012. SIPRI estimates that Germany spent $45.8 billion (35 billiion euros) on military expenditures in 2012, an increase of 0.9 percent compared to the previous year. However, the figure represents a drop of 1.5 percent compared to Germany's average annual spending since 2003.

Cuts offset

Despite the cuts in military spending by the US and Europe, increases in military spending of other regions have offset this effect to some extent.

For example, spending in the Middle East rose by 8.4 percent last year. North Africa's increase in military spending grew by 7.8 percent.

Military spending in Asian continues to grow but has lost some steam in recent years. SIPRI reports that while weapons spending in Asia increased an average of 7 percent for the years 2003-2009, this has slowed to 3.4 percent per year since.

"We are seeing what may be the beginning of a shift in the balance of world military spending from the rich Western countries to emerging regions, as austerity policies and the drawdown in Afghanistan reduce spending in the former, while economic growth funds continuing increases elsewhere," said Dr Sam Perlo-Freeman, Director of SIPRI's Military Expenditure and Arms Production Program.

"However, the USA and its allies are still responsible for the great majority of world military spending," he said. "The NATO members together spent a trillion dollars."

Perlo-Freedman predicts that global military spending will continue to fall for the next two years as NATO winds down its troop withdrawal from Afghanistan. He says that emerging regions will likely continue to increase their spending during this period, however.