This report analyzes the impact of theglobal economic crisis on the labor market and poverty inCroatia, and discusses the effectiveness of social safetynet policies in response to the crisis. It also presentsoptions to enhance the cost-effectiveness of social policyin Croatia in response to an economic downturn. It arguesthat the impact of the crisis on employment and poverty wassubstantial, but the policy response was limited. There issubstantial room to enhance the efficiency of the socialprotection system in Croatia within the existing resourceenvelope, and build resilience against potential futureeconomic shocks. The report is divided into five sections.Section one provides a backdrop for further analysis bypresenting recent macroeconomic developments. Section twolooks at the labor market effects of the crisis. Sectionthree examines the impact of the crisis on poverty. Sectionfour assesses the effectiveness of employment and socialsafety net programs in Croatia. The final section suggestsoptions to enhance the effectiveness of employment andsocial safety net policies in responding to economic fluctuations.