Chapter One: Domain trends

„ Global defence expenditure reached USD1.92 billion in 2021, 3.4% higher than 2020 levels. However, surging inflation in all regions meant this amounted to a 1.8% reduction in real terms. If inflation continues to increase, this will put pressure on defence budgets as factor-input costs increase, while military personnel may call for higher wages to keep pace with cost-of-living increases. „ In 2020, the United States was the primary driver of global defence-spending growth. However, US defence-budget authority fell to USD754bn in 2021, from USD775bn in 2020. Inflation rose from 3.1% to 6.4% in 2021, which meant that the budget contracted by 6% in real terms. „ High inflation rates also resulted in real spending contractions in Latin America, sub-Saharan Africa, the Middle East and North Africa, and Russia and Eurasia, even though nominal increases were evident across most regions. In real terms, Latin American spending is at the same level as in 2009. Meanwhile, economic constraints in sub-Saharan Africa have continued to subdue defence expenditure. In real terms, the region’s spending in 2021 is the same as it was in 2012. „ Middle Eastern regional defence spending has been relatively stable in nominal terms, but with rates of inflation averaging 6.9% annually (and in some countries exceeding 30%), there have been sizeable real-terms reductions, with cuts averaging 3.6% annually in the four years to 2021.