"Despite the economic impact of COVID-19 2020 was the sixth consecutive year of increased defense spending across European allies and Canada with an increase in real terms of 3.9 percent," Stoltenberg told a press conference to mark the launch of NATO's annual report.

"We expect that trend to continue this year, but it is absolutely vital that we maintain the momentum because security challenges have not gone away."

Overall military spending by the 30 members of the US-backed alliance reached $1.028 trillion (860 billion euros) last year, the report said.

The US still made up for the vast bulk of NATO's expenditure, accounting for 71 percent of combined defence spending among allies.

European nations have faced pressure from Washington to bolster their defence spending to a target threshold of two percent of gross domestic product, set in 2014 in the aftermath of Russia's annexation of Crimea.

Former US president Donald Trump harangued leading members like Germany to cough up more and accused them of taking advantage of American largesse.

New US leader Joe Biden has adopted a more diplomatic tone as he looks to rebuild relations, but his adminstration is expected to remain firm on getting Europe to pay more for its defence.

The NATO report said that last year 11 of the alliance's 30 members met the two percent target, up from nine in the report for 2019.

But that figure has been helped by the dramatic contraction in economies due to the coronavirus pandemic.

"In 2020 some allies that were already quite high have now come above the two percent because of reduction in the estimates for the GDP," Stoltenberg said.

"But what is stable and what we see every year is a steady increase in defence spending across the alliance."