Getting most or all NATO members to spend the alliance goal of 2% each of GDP on defense would be laudable, but do not expect that to translate into too much revenue for the defense industry, an analyst told the audience at Aviation Week's MRO Military conference in Orlando April 26.
If all of NATO achieved the 2% goal—which is not a requirement—the group’s annual defense spending likely would go from about $890 billion to $1.011 trillion, according to ICF Vice President Hal Chrisman. Operations and maintenance (O&M) budget accounts likely would see $42 billion more, while procurement and research accounts could see $24 billion more, based on historical spending.
While many companies depend on O&M budgets for revenue, particularly services providers, most manufacturers and suppliers closely watch investment accounts for weapons and systems procurement and development. Still, the prospects of a big run-up in defense spending across the alliance remain dim.
“Getting 2% out of every country is a pipe dream,” Chrisman told the MRO Military audience. Moreover, “most” of any increased spending would be expected to be driven toward local, national champions, not U.S.-based companies, although American primes and major suppliers could benefit from a trickle-down effect.