Overview

This review addresses the territorial dimension of a range of policy challenges in the Ukraine, including Urkraine's productivity challenge, large inter-regional disparities, and need for decentralisation. Ukraine's regions continue to struggle economically, having failed to regain the growth momentum they enjoyed in the years before the crisis hit in 2008-09. Export demand remains muted, and domestic demand growth is constrained by slow credit growth, lack of fiscal space and an institutional environment that is not conducive to investment. Inter-regional disparities are large by OECD standards and they continue to increase. However, they are not out of line with those of Ukraine's peers. Theincrease in disparities has been driven almost entirely by the city of Kyiv, with most other regions' contributions to growth being roughly in line with their size. There is evidence of significant disparities in access to basic services, especially education. Moreover, the human development index deteriorated in most Ukrainian regions during 2000-10, and only 12% of the population lived in regions where it improved. Productivity performance in much of Ukraine has been relatively poor. The industrial capital stock is limited and deteriorating. The large informal labour market makes it difficult to assess labour-market trends with precision but the link between education and productivity appears to be weak.

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