Romania’s election marathon is likely to deliver very little change
November 18, 2024
Why the EU should drastically increase aid to Ukraine
November 19, 2024
In the latest of our new series drawing on the original analysis and data collected by Emerging Europe as part of our Future of IT report, we look at Hungary.
Any in-depth look at Hungary’s IT sector presents a mixed picture, with both much progress and ongoing challenges shaping its trajectory.
Over the past decade, the country has undoubtedly carved for itself a niche as a regional hub for software development, outsourcing, and digital innovation, supported by a skilled workforce and competitive labor costs.
However, growth has recently shown signs of slowing, impacted by global economic uncertainty and a tightening labour market.
Now, as Hungary looks to the future, the sector’s success will depend on strategic investments in education, AI, and cybersecurity, alongside policies that foster a more vibrant start-up ecosystem.
The headline numbers are not great. In the latest, 2024 edition of Emerging Europe’s Future of IT report, Hungary dropped in the IT Competitiveness Index from fifth place in 2023 to eighth in 2024.
The report nevertheless recognises Hungary’s strengths in talent development, IT infrastructure, and business environment: all the necessary tools which make it a competitive player in the regional IT landscape.
Whether Hungary can regain its upward momentum or risk stagnation in the face of stiff competition remains a question for policymakers and industry leaders alike.
Talent
Hungary ranks fourth in the Talent subcategory of the IT Competitiveness Index, with a score of 19.00.
The country’s higher education institutions produce a steady stream of skilled IT professionals, particularly in fields such as engineering, software development, and data analysis.
Hungary’s universities and technical schools are known for their strong STEM programmes, which provide the country with a well-educated and competitive IT workforce.
In addition to formal education, Hungary offers several upskilling programmes aimed at ensuring that IT professionals can keep pace with the latest technological advancements.
These efforts have helped Hungary maintain a stable supply of talent for its growing IT sector.
IT infrastructure
Hungary ranks sixth in IT infrastructure, with a score of 10.88. The country has invested heavily in its digital infrastructure, particularly in expanding high-speed internet access and improving the quality of its data centres.
These investments have helped Hungary create a robust IT environment that supports both local and international businesses.
The government’s focus on digital transformation has also led to improvements in e-governance services and the digitisation of public services, further enhancing the country’s digital capabilities.
Hungary’s solid IT infrastructure is a key factor in attracting foreign investment in the tech sector.
Economic impact
In the Economic Impact category, Hungary ranks just 12th, with a score of 9.29. The IT sector plays an increasingly important role in the national economy, driven by a strong export market for IT services and the growing number of IT companies operating in the country. Hungary’s competitive cost structure, combined with its skilled workforce, makes it an attractive destination for foreign direct investment (FDI) in the IT sector.
However, the sector only contributes 4.3 per cent of GDP, well behind neighbouring Romania for example, where the IT sector’s share of GDP is 6.6 per cent.
The export of IT services has nevertheless been steadily increasing, further boosting Hungary’s position in the regional IT market. The country’s government has been actively supporting the IT sector through various policies aimed at promoting innovation and fostering the growth of technology-driven industries. More, it would appear, however, can be done to boost the figures further.
Business environment
Hungary ranks ninth in the Business Environment category, with a score of 13.04. The country’s business environment has improved in recent years, with reforms aimed at reducing bureaucracy and creating a more supportive ecosystem for IT companies.
Special economic zones and technology hubs provide resources and networking opportunities for start-ups and established businesses alike.
The Hungarian government has introduced tax incentives and financial support mechanisms for IT companies, helping to foster innovation and attract foreign investors.
Hungary’s growing tech ecosystem is supported by strong intellectual property protections and cybersecurity measures, creating a stable environment for businesses to thrive.
A look ahead
Hungary’s falling position in the IT Competitiveness Index reflects its strengths in talent, infrastructure, and business environment, but failings in its contribution to the wider economy.
If the country continues to invest in digital transformation and support the growth of its IT sector, Hungary will be well-positioned to remain a competitive player in the regional IT landscape.
With a strong foundation in place and the continued support of the government, Hungary’s IT sector should be poised for further growth. Building on its strengths and addressing the remaining challenges will crucial to making that happen, however.
At Emerging Europe, we use an integrated approach centred around market intelligence to help organisations understand trends and strategically position themselves for success.
Learn how our solutions can help you thrive in the region:
Company and Services Overview | Strategic Advantage.
