As military operations in Iraq, Afghanistan and the war on terror continue, the world spent $1.035 trillion on defense during the year, corresponding to 2.6 percent of global gross domestic product, the Stockholm International Peace Research Institute said.
The figure "is only 6 percent lower in real terms than it was in (1987-1988), which was the peak," said SIPRI researcher Elisabeth Skons, who co-authored the organization's annual report.
Worldwide military expenditure increased 6 percent in 2004, matching the average annual increase since 2002, the institute said.
However, the figures may be on the low end, the institute said, as countries are increasingly outsourcing services related to armed conflict, like military training and providing logistics in combat zones, without classifying them as military expenses.
SIPRI, a Swedish government-funded institute, said such outsourcing has more than doubled in the last 15 years, and was estimated to have reached $100 million during 2004, SIPRI researcher Caroline Holmqvist said.
"This is a global phenomenon," Holmqvist said, but added that it's difficult to provide exact figures.
"This is an industry that is not largely regulated," she said, adding that by 2010 global spending on such services are estimated to double current levels.