Indonesia will have the fastest growing defense budget in Asia Pacific over the next five years, according to a report by global analysis firm IHS.
Indonesia’s defense budget will increase by 17% in 2015, from IDR83.3 trillion ($6.3 billion) to IDR97.4 trillion ($7.4 billion) and is expected to grow 14% a year until the end of the decade (average annual growth). IHS Aerospace, Defence & Security forecasts that the Indonesian defense expenditure will pass IDR180 trillion ($14.3 billion) annually by 2020.
“Growth of this scale is certainly exceptional and the Indonesian government appears committed to raising defense spending significantly” said Craig Caffrey, principal budget analyst for IHS Aerospace, Defence & Security. “The economic outlook for Indonesia remains strong and President Widodo’s removal of the fuel subsidy will free up additional money for defense.”
For the next five years, Indonesia is likely to see a consistent level of growth. “Achieving sustainable high growth rates seems entirely possible given the strong political backing defense appears to have,” Caffrey said.
Indonesia was the world’s 15th largest importer of equipment in 2014, according to IHS data, importing $1.8 billion worth of equipment. The single largest supplier of equipment to Indonesia last year was South Korea ($450 million).
Growth elsewhere in Asia Pacific is also expected to be robust over the remainder of the decade averaging 4.7% in real terms. “Asia Pacific is really expected to be the driver behind global defense spending increases over the next five years,” Caffrey said “By the end of the decade, regional spending is expected to reach around $550 billion, or around a third of all global expenditure.”