The 1.9 per cent global decline followed a 0.4 per cent drop in 2012, the Stockholm International Peace Research Institute (SIPRI) said.
"The increase in military spending in emerging and developing countries continues unabated," said Sam Perlo-Freeman, director of SIPRI's Military Expenditure Programme.
"While in some cases it is the natural result of economic growth or a response to genuine security needs, in other cases it represents a squandering of natural resource revenues, the dominance of autocratic regimes, or emerging regional arms races."
The decrease was led by a 7.8 per cent fall posted by the United States, the world's largest spender, as a result of the end of the war in Iraq, the beginning of the drawdown from Afghanistan, and the effects of automatic budget cuts passed by the US Congress in 2011.
But the next three highest spenders -- China, Russia and Saudi Arabia -- are among 23 countries around the world that have more than doubled their military expenditure since 2004.
"Japan's concerns over China's growing military power, combined with the Japanese government's own nationalist policies, have led to Japan ending its long, gradual decline in military spending," said Perlo-Freeman.
"Nevertheless, the largest increase in the region in 2013 was by Afghanistan, by 77 per cent, as it builds up its security forces in preparation from the withdrawal of most foreign troops at the end of 2014."
In the Middle East, military spending increased by four percent, led by Saudi Arabia, which leapfrogged the United Kingdom, Japan and France to become the world's fourth largest military spender.
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