To secure its position as a global tech leader, Central and Eastern Europe must tackle infrastructure challenges, invest in talent, and harness the transformative potential of AI through innovation and international collaboration
In recent years, Central and Eastern Europe (CEE) has emerged as a dynamic hub for innovation, producing a growing number of tech unicorns. Companies like Romania’s UiPath, Poland’s Docplanner, Croatia’s Infobip, and Bulgaria’s Payhawk are not only reshaping industries but also highlighting the region’s potential in artificial intelligence (AI). From automating workplace tasks to improving healthcare access and streamlining corporate finance, these firms exemplify the transformative power of AI. The next breakthrough in tech could well originate from a startup in Warsaw, a university lab in Bucharest, or even a co-working space in Kyiv—developed at a fraction of the cost compared to Western Europe.
This wave of innovation is occurring in a region facing considerable challenges. While CEE countries strive to maintain competitiveness in traditional industries like automotive manufacturing, they are also dealing with post-pandemic financial pressures and the European Union’s revised budgetary rules. These constraints make AI an even more critical tool for addressing systemic challenges, such as enhancing public services like healthcare and education, countering foreign interference, and securing energy networks.
Company valuations in Central and Eastern Europe increased more than sevenfold between 2017 and 2022, reflecting the region’s growing appeal
CEE countries have a strong foundation to build upon. With a significant pool of STEM graduates and engineers, the region has seen company valuations increase more than sevenfold between 2017 and 2022. Furthermore, international investment is on the rise, with non-EU funding doubling from 9% in 2022 to 21% in 2023, reflecting the region’s growing global appeal. However, significant barriers remain. Research highlights that CEE economies lag behind Western Europe in infrastructure and investment. While the region boasts over 150 million people and a combined GDP nearing €2.5 trillion, private- equity investment fell sharply by 40% in 2023, dropping to €1.7 billion.
For many entrepreneurs, launching a startup can feel like attempting to build a rocket with bicycle parts. The rise of populist politics further complicates the economic landscape, as short-term fiscal policies, such as raising corporate and VAT taxes, take precedence over long-term economic stability. Such measures risk undermining investor confidence and slowing down progress in an already underfunded tech sector.
To harness the transformative power of AI and secure a competitive edge, CEE countries must prioritise three key areas:
Expanding STEM Education and Retaining Talent
The region’s biggest obstacle is a shortage of skilled professionals. While hundreds of promising startups have emerged across sectors like biotech, finance, and robotics, their growth is limited by an insufficient talent pool. Policymakers must reform educational systems to better prepare the workforce for the digital age, while the private sector should invest in upskilling and talent retention initiatives.
Deeper European Integration
AI’s transformative potential lies in enhancing public services, countering foreign interference, and securing critical energy networks, offering a path for CEE to address systemic challenges
Cross-border collaboration is essential for innovation. By facilitating the exchange of ideas, talent, and resources, greater integration with European initiatives like the European Commission’s AI Factories can accelerate progress. Structured partnerships among CEE governments and other European nations could also help align strategic technological priorities.
Attracting Foreign Investment
Despite geopolitical uncertainties and a recent decline in private-equity inflows, CEE has shown resilience. Boosting foreign investment is crucial not only for tech innovation but also for critical infrastructure projects, such as 5G networks, data centres, and quantum computing facilities. Strengthening the region’s appeal to investors will drive both economic and technological advancements.
A Pivotal Moment for CEE
Central and Eastern Europe stands at a crossroads. The region has the talent, ambition, and innovation to become a global leader in AI, but swift action is required. Without targeted investments in infrastructure, education, and international partnerships, CEE risks losing its brightest minds to opportunities elsewhere. By embracing AI’s transformative potential, CEE can secure its position as a vital player in the digital economy of the future.