This report analyzes the impact of the global economic crisis on the labor market and poverty in Croatia, and discusses the effectiveness of social safety net policies in response to the crisis. It also presents options to enhance the cost-effectiveness of social policy in Croatia in response to an economic downturn. It argues that the impact of the crisis on employment and poverty was substantial, but the policy response was limited. There is substantial room to enhance the efficiency of the social protection system in Croatia within the existing resource envelope, and build resilience against potential future economic shocks. The report is divided into five sections. Section one provides a backdrop for further analysis by presenting recent macroeconomic developments. Section two looks at the labor market effects of the crisis. Section three examines the impact of the crisis on poverty. Section four assesses the effectiveness of employment and social safety net programs in Croatia. The final section suggests options to enhance the effectiveness of employment and social safety net policies in responding to economic fluctuations.