Hungary's investment ambitions face a shortage of skilled people. Ambassador, Dr Nicholas Jeffery examines migration, demographics and AI as economic forces.
Dr Nicholas Jeffery | WBN News – Global | October 27, 2026 Editor: Karalee Greer | Subscribe to WBN News
The Diplomat’s Notebook. Ambassador, Dr Nicholas Jeffery http://linkedin.com/in/nicholas-jeffery
Some come to Hungary to study it; I married into it, which in this part of Europe tends to produce more durable conclusions. As a family, we moved back to our hometown of Budapest , for the third time from Vancouver just before COVID. I am now a resident, taxpayer, business owner and, from here, serve our global clients.
People are Hungary's most mobile Hungary does not have too few people in the abstract. It has too few of the people it needs, in the places it needs them, with the skills it needs, when it needs them. That is a very different problem, and one of the country's most important economic constraints, on growth and sovereignty.
THE FACTORY PARADOX Hungary has become exceptionally good at attracting capital, especially from China, using Hungary as a back door to Europe. HIPA has helped bring more than €66 billion of investment into the country since 2014, associated with almost 187,000 new jobs, although a lot of them were for Chinese citizens. These are impressive numbers, but they conceal a paradox: a country can attract capital faster than it can produce or attract the people required to deploy it, partly explaining why Chinese battery companies needed to bring their own workers.
For much of the last decade, Hungary's proposition rested on an abundance that once seemed self-evident: a well-educated, multilingual Central European workforce at competitive cost, conveniently placed between Germany and the Balkans, with good transport connections and an established industrial base.
Automotive manufacturing was the perfect expression of the model. Build the plant, build the supply chain, employ several thousand people and repeat.
It worked. The problem is that success changes the constraint. The more factories you build, the more people you need. Just-in-time supply chains add pressure because everything from wiper blades to brake lights needs to be close at hand.
Hungary is not producing people at anything like the rate at which it has been producing investment announcements.
By early 2026, employment had fallen by around 65,000 year-on-year even as the employment rate remained broadly stable because the population itself was shrinking. Unemployment was still below 5%. This is not primarily a story about unemployment. It is demography colliding with ambition.
And The Hungarian Import Promotion Agency (HIPA) appears to recognize the shift. In 2025, electronics overtook automotive in investment value and job creation. HIPA also recorded a record 14 R&D projects worth almost €570 million, while business-service-centre investments created 3,236 jobs. More than one-fifth of the new jobs associated with its 2025 results were linked to R&D and business services.
The investment machine is beginning to optimize for the asset of which it has fewer people.
THE EMPTY CHAIR You can see the same problem from the other end of the economy. Speak to senior people in professional services and a curious picture emerges: the problem is not necessarily a lack of business, but the inability to staff it.
A senior consultant, engineer, technology specialist or experienced manager is not simply an employee but a productive asset. A vacancy that remains open for months is unused economic capacity.
Hungary's labour-market slack was only 6.3% in 2024, among the lowest in the EU, so companies continued to report difficulty finding the required skills.
And the competition is obviously regional. A factory can be persuaded to move with subsidies, land, lower energy costs and logistics. But a highly skilled 35-year-old is harder to relocate, they potentially have a spouse, children, a mortgage, friends and choices.
Those choices are no longer merely London or New York. They are Warsaw, Prague, Bucharest and Vienna.
So the question is changing.
It is no longer simply: how do we persuade another company to build a factory here?
It’s how do we persuade the people who make that factory, run its technology, management, and drive its sales & marketing to build their lives here?
That is harder. It also brings us to one of Hungary's strongest potential economic assets: the people who left, who are potentially being overlooked.
THE HUNGARIANS ABROAD
Hungarian migration is usually described as a loss, back as far as 56. Of course it is.
When a highly educated 25-year-old moves to Germany, Britain or the Netherlands, Hungary loses part of the return on the education it helped provide.
But that is only half the calculation. Some come back. And when they do, they return with something Hungary did not have to finance, experience.
They bring management skills, languages, networks and an understanding of how international companies operate. Hungary gets the finished product. There is a remarkable economic arbitrage here.
This is why the migration debate deserves better language than simply "brain drain". Some people who leave are not permanently lost. They are potentially Hungary's most valuable future import.
But there is a catch. You cannot bring someone home merely by telling them that Hungary is their homeland. They come home when the economics work: when professional opportunities are compelling, housing and education are viable, healthcare is functioning and close to world class, and the quality of life compensates for the salary drop of as much as 45%. For younger generations, there needs to be a critical mass of internationally experienced peers and smart projects to work on so that returning does not feel like a backward step.
Human capital attracts human capital. The asset therefore becomes self-reinforcing, or self-depleting.
THEN CAME AI or S!
Just as Hungary discovers that people are scarce, artificial intelligence arrives, promising that perhaps we will not need so many of them.
The Magyar Nemzeti Central Bank (MNB) estimates that AI and automation could affect nearly one million Hungarian jobs by the end of the decade. As of August 2026, approximately 4.655 million people are in work in Hungary, according to data from the Hungarian Central Statistical Office. So, the AI impact is massive.
But "affect" is not the same as "eliminate". In My view … Technology removes some tasks, creates others and increases productivity by complementing existing work.
That distinction matters.
The question is not whether AI will destroy some Hungarian jobs. Clearly all indicators point to it will. The question is whether Hungary has the strategies to prompt AI make a scarce available human being more productive.
A consultant equipped with AI may not become unnecessary; they may become capable of doing the work of two. An engineer may design faster. A doctor may diagnose more effectively. A small Hungarian company may compete internationally with a fraction of the administrative workforce previously required.
If that happens, Hungary has found something it desperately needs: a way to multiply its people.
But there is a darker possibility. As digital work becomes easier to perform from anywhere, geography matters less. If the scarce Hungarian consultant can work for a German client from Budapest, wonderful. But the German client can also hire the Polish, Romanian or Indian consultant. Digital mobility does not eliminate competition for human capital. It may intensify it by allowing the most productive people to sell their capabilities into the largest market, from wherever they choose.
THE PEOPLE QUESTION
This is where the Hungarian debate becomes confused. Labour shortages, migration, returning Hungarians, automation, demographic decline and investment appear to be treated as separate subjects.
They are not. They are the same subject.
Hungary has spent the last decade successfully attracting capital into a country whose working-age population is becoming a constraint. The next phase cannot simply be about attracting more capital. It has to be about increasing the productivity of the capital already here.
That requires people who are better educated, more globally experienced and increasingly able to work alongside intelligent systems rather than compete with them.
This suggests a different definition of investment promotion.
If a €1 billion factory requires thousands of workers, its value to Hungary is constrained by their availability. If a €1 billion R&D operation requires a few hundred exceptional people, the constraint becomes the quality of the ecosystem around them.
That is where the next investment race may be fought, not simply between factories or tax incentives, but between cities and countries competing on education, housing, universities, healthcare, transport, security, culture and opportunity.
Ultimately, it will be a competition between places where talented people decide they want to spend the next twenty years of their lives, with their families.
That is a profoundly different contest.
HUNGARY'S MOST VALUABLE EXPORT
But the most valuable thing that can leave Hungary does not appear on a balance sheet.
A 28-year-old engineer leaving for Munich is not recorded as capital flight. Yet each departure removes future productivity. And unlike a factory, neither can be replaced with a government grant.
This is why the return of Hungarians matters. It is not only sentimental. It is economic.
A returning Hungarian can bring years of foreign-paid education, experience, networks and professional capital. It is one of the few forms of capital that can arrive without a balance-of-payments crisis, a debt issue or a foreign investor demanding a subsidy.
But it only works if Hungary becomes a place to which talented people want to return.
Hungary has become remarkably efficient at educating people who can become productive and wealthier elsewhere. The question is whether it is equally good at retaining the value they create.
THE ASSET THAT CANNOT BE BUILT QUICKLY
Perhaps this is the real limit to Hungary's investment model.
You can build a factory in two years. You can extend a motorway, subsidise a battery plant, construct an industrial park or even build a university campus.
What you cannot build quickly is a generation of experienced people, that takes twenty years. If they leave, it can take another decade to persuade some to return.
This is why demographic policy, education policy, immigration policy, housing policy, investment policy and AI policy are no longer separate questions.
It is one question, and the thesis needs to be in the new Ministries strategies now:
How does Hungary increase the amount of productive human capital inside its borders?
The answer cannot simply be more babies, imported workers, corporate subsidies or the hope that AI makes the problem disappear.
It has to be more ambitious.
Hungary needs to become a place where exceptional people are disproportionately productive; where a returning Hungarian finds that international experience is worth more at home than abroad; where a foreign specialist wants to settle; where an engineer can afford a house; where a young family sees a future; and where a multinational can find not merely 5,000 workers, but 500 people capable of making the other 4,500 dramatically more productive.
That is the human-capital economy.
And it is coming whether Hungary is ready or not.
Hungary already possesses much of the raw material: a highly educated population, a large diaspora, universities, research institutions, an increasingly sophisticated industrial base and a central European location.
Hungary's next competitive advantage will not be cheap labour, nor simply tax structures and grants.
It will be productive people.
For a country that has become so successful at attracting investment, perhaps the most important investment-promotion project of the next twenty years is therefore rather more personal.
The next decade will determine whether Hungary can learn to compound people. A factory can be rebuilt, capital refinanced and technology bought. Human capital accumulated over twenty years cannot.
The prize is not keeping every Hungarian at home. People will leave. They should.
The prize is creating a country to which talented Hungarians want to return, bringing with them the experience, networks and productivity that another economy helped them acquire.
Hungary's competitive advantage may ultimately depend not on how many people it can employ, but on how much value each person can create, and whether Hungary can make creating that value here the better choice.
In the end, the competition is not for workers. It is for people with choices.
Thank you, Nicholas
About the Author
Ambassador, Dr. Nicholas Jeffery | WBN News
LinkedIn: http://linkedin.com/in/nicholas-jeffery Substack: https://nicholasfentonjeffery.substack.com/p/the-people-question-why-hungarys?r=7ctspz&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true
After more than four decades in international banking and technology across London, Central Europe and global markets, I have advised governments, Royal houses, corporations, investors and institutions on commercial opportunity and geopolitical uncertainty.
Hungary increasingly sits at the crossroads of European capital, innovation and regional influence. Whether establishing new ventures, accelerating growth or quietly facilitating strategic transactions, success here, like the Danube itself, often depends upon understanding both banks.
Editor: Karalee Greer Subscription and being a Contributor is Free LinkedIn: https://www.linkedin.com/in/karalee/
Tags: #Danube Dispatches #Nicholas Jeffery #Hungary #Human Capital #Migration #Artificial Intelligence #European Economy
