The Fiscal Implications of Meeting the NATO Military Spending Target

Communications

Quotes

• Based on our analysis and independent GDP projections, the government’s latest military spending forecast reaches only 1.58% of GDP by 2029-30, which means military spending will have to be increased by 0.42 percentage points of GDP within the following three years to meet the target by 2032-33.

• To meet Canada’s NATO spending commitment, military expenditures need to rise to $81.9 billion by 2032-33, which is nearly double the $41 billion projected for 2024-25.

News Release

{"id":70,"created_at":"2024-10-29T07:43:11-04:00","updated_at":"2024-10-30T08:57:09-04:00","slug":"annual-military-spending-must-reach-819-billion-by-2032-33-to-meet-natos-spending-target-new-pbo-report-finds-les-depenses-militaires-annuelles-doivent-atteindre-819-milliards-de-dollars-dici-a-2032-33-pour-respecter-lobjectif-de-depenses-de-lotan-selon-un-nouveau-rapport-du-dpb","title_en":"Annual military spending must reach $81.9 billion by 2032-33 to meet NATO\u2019s spending target, new PBO report finds","title_fr":"Les d\u00e9penses militaires annuelles doivent atteindre 81,9 milliards de dollars d\u0027ici \u00e0 2032-33 pour respecter l\u0027objectif de d\u00e9penses de l\u0027OTAN, selon un nouveau rapport du DPB","body_en":"The Parliamentary Budget Officer (PBO) has released a new report assessing the fiscal sustainability of Canada\u2019s commitment to meet NATO\u2019s military spending target of 2% of GDP by 2032-33. \n\nIn April 2024, the government released a new defence policy, Our North Strong and Free: A Renewed Vision for Canada\u2019s Defence (ONSAF), which projected military spending to reach 1.76% of GDP by 2029-30.\n\nThe government has not released any figures showing how it plans to meet the 2% target by 2032-33. In addition, the figures released in the ONSAF forecast are based on erroneous GDP projections.\n\n\u201cBased on our analysis and independent GDP projections, the government\u2019s latest military spending forecast reaches only 1.58% of GDP by 2029-30, which means military spending will have to be increased by 0.42 percentage points of GDP within the following three years to meet the target by 2032-33,\u201d adds Mr. Giroux.\n\nThe PBO\u2019s report evaluates a scenario where projected military expenditures under the government\u2019s new defence policy are fully realized through the 2029-30 fiscal year and then rise to hit the 2% target by 2032-33.\n\n\u0022To meet Canada\u2019s NATO spending commitment, military expenditures need to rise to $81.9 billion by 2032-33, which is nearly double the $41 billion projected for 2024-25,\u0022 says Yves Giroux, PBO. \n\nDespite the sharp increase in defence spending required to reach the NATO target of 2% of GDP, Canada\u2019s debt-to-GDP ratio is still expected to decline, reaching 38.2% by 2032-33, just above the baseline level of 36.6%. However, the deficit-to-GDP ratio faces more pressure, exceeding 1% in the final years of the projection, driven by the additional military expenditures necessary to meet NATO\u2019s requirement.","body_fr":"Le directeur parlementaire du budget (DPB) a publi\u00e9 un nouveau rapport dans lequel il \u00e9value la viabilit\u00e9 financi\u00e8re de l\u2019engagement que le Canada a pris de consacrer 2 % de son produit int\u00e9rieur brut (PIB) \u00e0 la d\u00e9fense d\u2019ici 2032-2033, selon la cible fix\u00e9e par l\u2019OTAN. \n\nEn avril 2024, le gouvernement a publi\u00e9 une nouvelle politique de d\u00e9fense, intitul\u00e9e Notre Nord, fort et libre : Une vision renouvel\u00e9e pour la d\u00e9fense du Canada, qui pr\u00e9voit que les d\u00e9penses en mati\u00e8re de d\u00e9fense atteindront 1,76 % du PIB d\u2019ici 2029-2030.\n\nLe gouvernement n\u2019a publi\u00e9 aucun chiffre indiquant comment il compte atteindre la cible de 2 % d\u2019ici 2032-2033. En outre, les chiffres utilis\u00e9s pour les pr\u00e9visions contenues dans Notre Nord, fort et libre : Une vision renouvel\u00e9e pour la d\u00e9fense du Canada reposent sur des projections du PIB erron\u00e9es.\n\n\u00ab D\u2019apr\u00e8s notre analyse et des projections du PIB ind\u00e9pendantes, les plus r\u00e9centes pr\u00e9visions des d\u00e9penses militaires du gouvernement ne correspondront qu\u2019\u00e0 1,58 % du PIB d\u2019ici 2029 2030, ce qui signifie que les d\u00e9penses militaires devront \u00eatre augment\u00e9es de 0,42 point de pourcentage du PIB au cours des trois ann\u00e9es suivantes pour atteindre l\u0027objectif en 2032-33 \u00bb, explique M. Giroux.\n\nDans son rapport, le DPB \u00e9value un sc\u00e9nario o\u00f9 les d\u00e9penses militaires pr\u00e9vues dans le cadre de la nouvelle politique du gouvernement se concr\u00e9tisent tel que pr\u00e9vu jusqu\u2019en 2029-2030 pour ensuite atteindre la cible de 2 % d\u2019ici 2032-2033.\n\n\u00ab Pour respecter la cible fix\u00e9e par l\u2019OTAN, les d\u00e9penses militaires du Canada doivent grimper \u00e0 81,9 milliards de dollars d\u2019ici 2032-2033, soit pr\u00e8s de deux fois plus que le montant de 41 milliards de dollars pr\u00e9vu pour 2024-2025 \u00bb, affirme le DPB, Yves Giroux. \n\nMalgr\u00e9 la hausse marqu\u00e9e des d\u00e9penses en mati\u00e8re de d\u00e9fense afin d\u2019atteindre la cible de 2% de l\u2019OTAN, le ratio de la dette au PIB devrait continuer de diminuer et atteindre 38,2 % d\u2019ici 2032-2033, un peu au-dessus du niveau de r\u00e9f\u00e9rence de 36,6 %. Toutefois, le ratio du d\u00e9ficit au PIB est mis \u00e0 plus rude \u00e9preuve et sera sup\u00e9rieur \u00e0 1 % dans les derni\u00e8res ann\u00e9es de la projection, compte tenu des d\u00e9penses additionnelles en mati\u00e8re de d\u00e9fense qui sont n\u00e9cessaires pour respecter la cible de l\u2019OTAN.","release_date":"2024-10-30T09:00:00-04:00","is_published":"2024-10-30T08:57:09-04:00","internal_id":"COM-2425-070","permalinks":{"en":{"website":"https:\/\/www.pbo-dpb.ca\/en\/blog\/news-releases--communiques-de-presse\/annual-military-spending-must-reach-819-billion-by-2032-33-to-meet-natos-spending-target-new-pbo-report-finds-les-depenses-militaires-annuelles-doivent-atteindre-819-milliards-de-dollars-dici-a-2032-33-pour-respecter-lobjectif-de-depenses-de-lotan-selon-un-nouveau-rapport-du-dpb"},"fr":{"website":"https:\/\/www.pbo-dpb.ca\/fr\/blog\/news-releases--communiques-de-presse\/annual-military-spending-must-reach-819-billion-by-2032-33-to-meet-natos-spending-target-new-pbo-report-finds-les-depenses-militaires-annuelles-doivent-atteindre-819-milliards-de-dollars-dici-a-2032-33-pour-respecter-lobjectif-de-depenses-de-lotan-selon-un-nouveau-rapport-du-dpb"}},"pivot":{"publication_id":825,"news_release_id":70}}