Defense Budget Hikes: Leading NATO Nations Budget Allocation in 2024 Revealed
The North Atlantic Treaty Organization (NATO) has seen a significant surge in defense spending among its members, with the majority committing to boost their defense budgets above the previously agreed-upon threshold.
At last week's NATO summit, nearly all members agreed to raise their defense spending target to 5% of their GDP by 2035. The only exception is Spain, which has opted out of this new threshold, citing its ability to meet NATO military requirements with a lower spending target.
As of 2024, the progress towards the initial 2% GDP defense spending threshold has been impressive. All but eight out of 31 NATO member states have met this target, with the average defense expenditure across the alliance standing at 2.71% of GDP in 2024, up from 2.53% in the previous year.
In 2014, NATO members unanimously committed to spending at least 2% of their GDP on defense in response to Russia's initial invasion of Ukraine. Since then, the U.S. has been spending above 3% of its GDP on defense, while countries like Poland and Estonia have significantly increased their defense spending.
Poland quickly moved above the 2% defense spending threshold the year after the 2014 commitment was agreed upon, and in 2024, its defense spending as a share of GDP was the highest among NATO members at 4.12%. Estonia moved above the 3% defense spending threshold for the first time in the tracking period, with its defense spending rising to 3.43% of GDP in 2024.
Germany was the next closest member to the U.S. in defense spending in 2024, with $97 billion (2.12% of German GDP). Latvia's defense spending in 2024 was 3.15% of its GDP, and Greece had the fifth-highest defense spending as a percentage of GDP among NATO members, reaching 3.08%.
The United States, with its $967 billion in defense spending in 2024, spent the most on defense among NATO members. The alliance's financial commitment to defense spending has strengthened with all but one of NATO's 32 members agreeing to the new 5% threshold over the next decade.
While not all NATO members met the original 2% threshold for defense spending as a percentage of GDP by last year, a record number did so. This substantial commitment to the original goal sets a promising precedent for the alliance's ability to meet the more ambitious 5% target by 2035.
- The increase in defense spending among NATO members has not only extended to the previously agreed 2% GDP target but also triggered discussions in the realm of politics and finance about meeting the new commitment of 5% GDP by 2035.
- With the general news reporting a steady rise in defense budgets among NATO members, partially attributed to geopolitical tensions, the financial sector is closely monitoring the members' progress towards the anticipated 5% defense spending target by 2035.
