Global Aerospace and Defense Spending

Globally, outbreak of pandemic in early 2020 had an adverse impact on world economy and put tremendous pressure on government finances across most parts of the world, has decimated commercial aviation and the same is also likely to have an impact on defense spending over near term.

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Global Defense spending has been on a major upswing led by the return to great power competition amongst leading geopolitical powers spearheaded by R&D led technological evolution. Defense spending has been on a sustained growth trajectory in the EU as well with the French defense budget for 2021 registering an increase over 2020 in line with France’s 2019-2025 military program law despite the pandemic and economic pressures.

German defense spending too is poised for a 3.9% increase for 2021 and is likely to remain stable through 2024 auguring well for the joint Franco-German defense programs going forward with the European Aerospace & Defense industry witnessing a growing trend towards pursuit of joint defense equipment development programs.

U.S. defense spending focus on competing with near peer adversaries and maintaining the traditional overmatch over adversaries has accelerated the pace of replacement of ageing equipment with the award of several new defense contract awards over the recent years & many others in pipeline which remain a key focus area for the industry given their strategic nature, scale as well as scope & long term horizon.

This shift in strategic focus entails fast tracked procurement of systems & hardware to maintain numerical superiority besides rapid development & deployment of next generation capabilities to plug existing and potential capabilities gaps and to retain the traditional, long standing strategic capabilities overmatch against adversaries along with continued R&D pursuits to maintain technological edge.

Demand side growth, led by changing geopolitical equations & dynamics, is being counterbalanced with the technological advancements and evolution by the supply side, led by the industry, which is incentivizing the replacement of legacy defense hardware worldwide with next generational equipment marking a quantum leap in performance and capabilities while offering an optimized total cost of ownership. However, strategic and long term programs are unlikely to be impacted by the same across most parts of the world going forward.

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