Description

The impact of pandemics on the global economy over the past 50 years provides limited guidance on expectations from the recovery period – mainly due to the globalization of world trade and the most severe restrictions on democratic freedoms in modern memory.

While the medical community can look at previous pandemics to help model their countermeasures, economists are examining the 2008-2009 global financial crisis for comparison. At the time of writing this research service, the International Monetary Fund (IMF) had predicted a 3% contraction in the global economy for 2020 (based on the assumption that the pandemic would continue to fade in the economic powerhouses). The IMF anticipates a return to growth of 5.8% in 2021, presuming “economic activity normalizes, helped by [government] policy support”. At present, a V-type recovery is predicted for 2021.

As defence spending is driven by annual budgets, it is will remain resilient to drastic short-term falls in the GDP. In addition, defence budgets are driven by threats to national sovereignty more than financial affordability within the GDP (however, the two are linked, more often than not). Therefore, Frost & Sullivan predicts that defence spending will be flat, initially, and rebound later, if the geopolitical instability driven by China, Russia, Iran, North Korea, and non-state terror organisations continues (the trend is highly likely to continue). While some nations, such as South Korea, plan to divert defence spend to crisis management, the boundaries between both are blurred and, in this case, completely tied to the threats and actions of its Northern neighbour.

However, within the predicted flat budget, nations will re-appraise their defence spending plans (typically, over the 10 years of their delivery). Thus, opportunities to modernize and transform must be leveraged. Some legacy programs will be replaced by technologically advanced systems, especially those proven to have dual use in aiding the Civil Authorities, such as military field hospitals. In addition, the impact of the pandemic in terms of greatly reducing global military operations and live training means that viable deterrents will be sought; a logical component of this will be the increased importance of simulation in training.

Frost & Sullivan recommends that industry leaders focus on strategic imperatives and build growth mechanisms now as innovation and agility will determine the new industry paradigm.

Author: Michael Rowe