The Performance of Medium-Term Budgeting in Türkiye: An Analysis of Budget Forecasts

The accuracy of medium-term budgeting is crucial for sustainable financial management and strategic planning in both the public and private sectors. Realistic forecasts ensure the efficient allocation of resources, prevent unnecessary expenditures, and help maintain fiscal discipline. It is believed that, especially for developing countries, medium-term budgeting can establish long-term sustainable development. Motivated by this perspective, this study evaluates the success of medium-term budgeting in Türkiye based on medium-term forecasts of budget revenues and expenditures. Given that Türkiye adopted medium-term budgeting in 2005, the study analyzes two- and three-year budget forecasts for the period between 2009 and 2023. Initially, the accuracy of the forecasts was calculated, identifying which items had higher forecast errors and the direction of these errors. Subsequently, the Holden-Peel (1990) test was employed to determine whether there was any upward or downward bias in the forecasts. The results indicate that forecast errors for both revenues and expenditures were significantly high, revealing that medium-term budgeting was quite unsuccessful. However, there was negligible bias in the forecasts. Despite being prepared 16 times during the examined period, medium-term budgeting practices in Türkiye did not achieve the desired success. Keywords: Medium-Term Budgeting, Budget Forecasting, Türkiye, Holden-Peel Test JEL Codes: H61, H68, E61, E66