North Korea ranked No. 1 in the world for military expenditures relative to its gross domestic product between 2004-2014, spending nearly a quarter of its GDP on the armed forces, an annual State Department report showed Thursday.

According to the State Department's World Military Expenditures and Arms Transfers 2016 report, the North's military expenditures averaged about $3.5 billion a year. That accounts for 23.3 percent of the country's average GDP of $15 billion during the period.

Oman was a distant second on the list, spending 11.4 percent of its GDP on the military, followed by Saudi Arabia with 8.6 percent, South Sudan with 8.4 percent and the African nation of Eritrea with 6.9 percent, according to the report.

South Korea spent about 2.6 percent of its GDP on the military, the 47th largest in the world, while Japan was in 136th place by spending an average 1 percent of its GDP on the military during the period, according to the report.

In absolute terms, however, the North's annual military spending during the period ranked only 46th in the world, while South Korea's ranked 11th, spending an average $30 billion. The US was by far the world's No. 1 with $701 billion a year on average, way ahead of runner-up China's $114 billion.

In 2014 alone, the US military expenditures amounted to $656 billion, while China's totaled $157 billion. The gap between the two countries narrowed significantly from last year's report that put the US military spending in 2012 at $724 billion, compared with China's $126 billion.

North Korea's 2012 military spending came to $4.17 billion, while South Korea's expenditures totaled $39.3 billion, according to the report.

The US was by far the biggest arms exporter in the world, selling an average $120 billion worth of weapons to foreign countries annually during the period. Russia came next but trailed with only $8 billion worth of exports.

North Korea ranked 31st on the list, with about $100 million of annual arms exports. But Pyongyang's arms exports accounted for 6.6 percent of its total exports, making the country the No. 1 in terms of the proportion of weapons to total exports, the report showed. (Yonhap)