Government at a Glance: Southeast Asia 2025

3.2. Medium-term and top-down budgeting

Medium-term and top-down budgeting are key elements of medium-term expenditure frameworks (MTEF). A medium-term perspective enables policymakers to assess the fiscal impact of current decisions over time, ensuring greater predictability in resource availability and allocation. Top-down budgeting reinforces fiscal discipline by setting spending limits that align budgets with the government’s financial strategy and policy priorities. Effective implementation of these approaches requires key budgetary mechanisms, such as top-down expenditure ceilings. Ideally, top-down expenditure ceilings should be binding for at least two years and assigned to ministries to strengthen ownership and accountability. Beyond this period, ceilings can become more flexible and indicative. They should either align with the government’s term or be updated annually on a rolling basis (OECD, 2023).

In 2024, all eight SEA countries for which data are available used top-down expenditure ceilings (Table 3.3). Malaysia uses top-down expenditure ceilings only for the upcoming year, whereas the other seven countries have multi-year top-down expenditure ceilings in place. This is similar to OECD Member countries, of whom 33 out of 36 use top-down expenditure ceilings, and 26 out of 36 use them on a multi-year basis. While approaches to setting expenditure ceilings vary across countries, many SEA countries and OECD countries follow similar patterns. Most countries set ceilings for a period of three to four years (SEA: 6 out of 8, OECD: 22 out of 36); establish binding ceilings for at least the upcoming budget year (SEA: 6 out of 8; OECD: 25 out of 36); and assign them at the organisational level, such as line ministries or agencies (SEA: 7 out of 8; OECD: 23 out of 36). Most countries with multi-year expenditure ceilings use a rolling medium-term framework (SEA: 5 out of 7; OECD: 20 out of 26 countries), meaning that each year the ceiling is extended by one year to incorporate an additional outer year. A smaller proportion of countries apply a fixed-period framework, where new ceilings are set only after the initial period ends (SEA: 2 out of 7; OECD: 6 out of 26).

Figure 3.1). The Philippines and Thailand make adjustments more frequently in response to new macroeconomic and revenue forecasts. Similarly, in OECD countries, 12 out of 26 revise their out-year ceilings once per year, while 4 countries adjust them more than once annually.

Methodology and definitions

Data for SEA countries are drawn from the 2024 OECD Senior Budget Officials Survey for Asian Countries, with responses from eight SEA countries. Data for OECD countries are drawn from the 2023 OECD Senior Budget Officials Survey on Budget Frameworks, with responses from 36 OECD countries. For both surveys, the data refer only to central/federal government practices. Responses represent the countries’ self-assessments of current practices and procedures.

Medium-term budgeting refers to budgeting for a period of multiple years. Top-down budgeting refers to defining spending limits based on the economic forecast, estimates of future spending on current policies (baselines) and the government’s fiscal objectives, before considering bottom-up budget requests.

Top-down expenditure ceilings refer to setting an upper limit on the level of government expenditure, whether for multiple years or the annual budget. Ceilings can be set for different areas of expenditure, for organisations and/or other levels.

Further reading

Moretti, D., A. Keller and M. Majercak (2023), “Medium-term and top-down budgeting in OECD countries”, OECD Journal on Budgeting, Vol. 23/3, https://doi.org/10.1787/39425570-en.

OECD (2023), OECD Spending Better Framework, OECD Publishing, Paris, GOV/SBO(2022)6/REV1.

Figure notes

Table 3.3, Figure 3.1. Data are not available for Viet Nam, Lithuania or Mexico. Australia, Belgium and Italy do not use top-down expenditure ceilings. Australia publishes multi-year expenditure forecasts that are not ceilings in nature.

Table 3.3. T1 is the upcoming budget year. The table shows up to which year either binding or indicative ceilings are used. Further explanations on country-specific details (letters a to c) are available in the statlink.

Figure 3.1. Data are only available for countries that have multi-year top-down expenditure ceilings (beyond the upcoming budget year). “Other” for Singapore: Usually revised every five years, matching the fixed-period framework. Each year, a ministry’s ceiling increases based on smoothed GDP growth, known as the budget growth factor (BGF). If GDP growth changes, the BGF adjusts, which in turn affects future ceilings. The Ministry of Finance can also modify ceilings if significant factors beyond the ministries’ control arise. “Other” for OECD countries includes, but is not limited to, specific reasons for revisions that are typically done once a year (or more in exceptional cases).

Table 3.3. Types, length and level of top-down expenditure ceilings, SEA countries (2024) and OECD countries (2023)

Source: For SEA countries: OECD (2024), Senior Budget Officials Survey for Asian Countries. For OECD countries: OECD (2023), Senior Budget Officials Survey on Budget Frameworks.

Statlink

Figure 3.1. Frequency of multi-year top-down expenditure revisions, SEA countries (2024) and OECD countries (2023)

Source: For SEA countries: OECD (2024), Senior Budget Officials Survey for Asian Countries. For OECD countries: OECD (2023), Senior Budget Officials Survey on Budget Frameworks.

Statlink