Military procurement programmes will be affected due to COVID-19, opined majority of the respondents to a poll that Verdict has conducted to assess the pandemic’s impact.
The impact will be significant, according to 47% of the respondents, while 26% of the respondents expect a normal impact. The remaining 27% of the respondents foresee no impact on procurement programmes due to the impact.
COVID-19 impact on military procurement programmes
COVID-19 has resulted in most economies shifting their focus to public health and containment. The World Bank has forecast that the global economy is projected to shrink by 5.2% in 2020 due to the COVID-19 pandemic.
The negative growth is expected to invariably affect defence expenditure too. Russia, India, South Korea and Thailand are among the few countries that have either paused or reduced defence expenditure as they grapple with an economic slowdown.
Procurement programmes in the near-term are expected to be affected due to the challenges posed by the pandemic for defence companies, such as cash flow and supply chain disruptions. In the long-term, procurement budgets may need to prioritise expenditure on specific programmes. For example, the pandemic may impact the modernisation plans of NATO even though the organisation has urged members to maintain expenditure of 2% of GDP on defence.
Countries such as the US have taken a different approach to defence expenditure by focusing on investing in the defence units of aerospace companies that are currently suffering due to the pandemic. Such an approach can help in regenerating economic activity, while ensuring stability.