ABSTRACT
Economic performance has strongly influenced defense spending patterns in the Middle East and South Asia. In the period immediately following the 1973/1974 oil price increases, when the region as a whole and the Middle East in particular experienced unprecedented growth in economic output and exports, defense spending increased dramatically. In Saudi Arabia, for example, increased defense spending has stimulated higher demand for goods and services, public and private investment, and increased spending on education. In certain countries, in particular Egypt and Pakistan, surges in defense spending associated with arms races and intra-regional conflicts have slowed short-term economic growth. From 1960 to 1987, India, Egypt, Syria, Algeria and Saudi Arabia all experienced substantial periods of positive net economic benefits from defense expenditures. The positive effects of defense spending were more pronounced in the wealthier, less resource-constrained countries. Defense expenditures in Israel have stimulated investment, but their longer run impact on growth appears neutral.
