The next gold medal: How Hungary can win the productivity race in the digital age

A new era of technological disruptions, an aging population, urbanization and a multiplying web of interconnectedness are irreversibly shaping the world's economy. Although these trends create an unprecedented amount of uncertainty for economies and companies alike, they also represent an exciting opportunity for the brave actors willing to harness them.

Twenty years ago, McKinsey opened its Budapest office. Since then, our office has become a trusted advisor to many of the most notable enterprises present in Hungary and in the region. Our consultants have served companies across industries, helping them to address, among others, the most significant questions of the digital age.

The megatrends of this new era present opportunities on a magnitude that has never been seen before, and Hungary is well positioned to reap the benefits. In an effort to assist the country in this endeavor, we have used our expertise in various industries and economic development to analyze four areas that are best placed to propel labor productivity to the front lines of growth and serve as catalysts for the entire economy. These are: life sciences, automotive, knowledge process outsourcing and small- and medium-sized enterprises.

This report's recommendations, which ultimately aim to narrow the wealth gap between Hungary and the OECD average, do not focus on upscaling volume, but rather on increasing labor productivity. This is especially relevant, as longing for a sense of purpose has never been as strong as it is today, in the age of not only digital, but also of Hungary's strive for gold medals. By increasing labor productivity in these four sectors, Hungary's next gold medal—among the aforementioned benefits, an annual incremental GDP increase of 0.5-0.7 percent over the next decade—is well within reach.