Why did Hungarian industry struggle after the collapse of state socialism?

Following the collapse of state socialism, Hungarian industry struggled primarily because it was ill-equipped to compete in the global market. Under the previous centrally planned economy, industrial growth had been driven by forced policies that prioritized heavy industries—such as iron, steel, and engineering—while neglecting modern infrastructure, technology, and high-tech development.12

This structural reliance on outdated patterns and Soviet-style production left the sector vulnerable when the country transitioned to a market-based system. The sudden opening of the economy, combined with the abolition of state subsidies, exposed the noncompetitive nature of these industries. Consequently, Hungary faced a significant economic decline in the early 1990s, characterized by a sharp drop in industrial output and the collapse of large portions of the engineering and metallurgy sectors. Furthermore, the country was burdened by enormous external debt, which had accumulated during the preceding decades of stagnation and failed attempts to manage the world economic crisis after 1973.123