Hungarian Firms to Cut Back on IT Improvements

66% of Hungarian firms plan to cut back on IT upgrades due to the significant rise in energy prices, according to a joint survey by Association of Information Technology, Telecommunications and Electronics Enterprises (IVSZ) and the Macronome Institute.

The association says that this result is also worrying because in order to maintain and increase the competitiveness of the economy, steps should be taken to increase efficiency through technological modernization. In this context, there would be a risk if the government were to continue to block central budget payments after October 31, or possibly freeze previously planned IT developments, or if businesses were to cut back on IT developments. 

The IVSZ – Alliance for the Digital Economy, in cooperation with the Macronome Institute, is preparing a market survey of the Hungarian IT sector, with the aim of using the results of the research to outline the situation and future of the sector from the perspective of Hungarian IT companies, identifying the critical points affecting the market. The survey, which will run over several months and include 120 in-depth interviews, started in July 2022, but the responses from the first 250 domestic ICT companies already highlight important trends.

Although the IT sector is less energy-intensive overall and less dragged down by rising energy prices than other sectors, IVSZ says that recession fears among companies, stagnating revenues and severe wage inflation may also slow growth in this market, exacerbated by spill-over effects from other sectors.

This is supported by the preliminary results of the survey: a total of 36.6% of IT firms asked said they were certain (12.3%) or likely (24.6%) to have to scale back planned developments due to rising energy prices. More interestingly, 66.2 percent of companies said that their own customers would definitely (24%) or probably (42.2%) cut back their planned IT developments.

Another dangerous scenario is also highlighted in the survey. The Hungarian government published in the Hungarian Gazette at the end of September that, "in order to maintain a balanced budget", it will make payments to bodies under its supervision subject to ministerial authorization until October 31, 2022, with a few exceptions. The one-month delay in payments creates a manageable situation, but a possible delay in the state payment stop could lead to stagnation in revenues, exacerbating the effects of the recessionary outlook, which is precisely the time to invest in modern technologies.