Since 2000, Ukraine’s economy enjoyed strong economic growth - at 7.5 percent average, among the highest in Europe - up until the onset of the global economic downturn in 2008. Despite that significant growth in the early part of the last decade, the global economic and financial crisis hit Ukraine particularly hard given pre-existing macroeconomic imbalances, structural weaknesses, and policy shortcomings that prevented the Ukrainian economy to diversify, to innovate and to encourage creative capacity. At the regional level development was strikingly uneven. In 2007, two regions – Kyiv City and Donetsk Oblast – shared almost a third of Ukraine’s annual gross domestic product. As a result, the Government of Ukraine has been exploring a new approach to regional policy to address this issue. This approach is based on a decentralized system of local and regional self government, with a stronger role for the local and regional authorities in planning for positive change in the economic, social and environmental realm.
Ukraine’s commitment to a more strategic approach to regional development is further reflected in the establishment of the Ministry of Regional Development, Construction and Housing (MoRDCH) in 2007. Since its creation, MoRDC has been actively promoting key legislation related to regional development. It is also responsible for the allocation of capital grants for regional priority investment projects, one of the key instruments for regional policy implementation. The Ministry of Economy (MoE) continued to share responsibility for regional policy, especially as it pertains to economic development.