03 JULY 2025
We are in an era of fiscal dominance, in which huge budget deficits are commonplace.
Going forward, these deficits are likely to be driven increasingly by defence spending.
The chart below shows the top 10 nations for military spending. The values are the annual dollar amounts spent, based on 2024 figures.
The US is, by some margin, the most dominant player. It allocated around U$1trn to its defence budget last year.
Unsurprisingly, Russia and Ukraine make the list, whilst the UK spends just shy of U$100bn p.a. on its military.
The light blue bars represent NATO members and this is where most of the expenditure is likely to appear over the coming years.
In late June, against a backdrop of heightened geopolitical tensions in the Middle East, the NATO countries finally agreed to President Trump’s demands to raise their defence spending from around 2% of GDP to 5%.
That means several hundred billion dollars more will be spent each year on rearmament and various other military initiatives.
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