A tectonic plateshift has started. There will be a War Dividend to recoup the Peace Dividend since the Fall of the Berlin Wall. Events in Europe will cause a global arms race as Alliances break down and nations and blocs “go it alone”. Defence demand will far exceed supply.
This takes time to unfold, and it does so more gradually than the hype. But the defence boost keeps on coming as the reasons that caused it will not lessen or go away.
Within Europe the estimate is that defence spending will rise by e700bn (US$756bn) in total over the next 5 years. That is the equivalent of an annual increase in defence spending of 35% or e140 bn. It is likely the take up will be slower initially due to a limited absorption capacity of a military that has been neglected for 40 years.
The boost to GDP is likely to be around 0.3% p.a. initially because the aggregate boost to GDP demand of 0.8% will see most (60%) of hardware supplied from outside of Europe. The exception to this is Germany where the total stimulus package could boost GDP by 1-2% pa.