The subject of this paper is the fiscal policy in the Republic of Croatia. Fiscal policy can be defined as a change in country revenues and expenditures which purpose is to achieve macroeconomic goals of economic policy, such as full employment, stable prices, satisfactory rates of growth in the economy and the external balance. Based on the analysis of fiscal policy in the Republic of Croatia it is evident that fiscal policy is mainly focused on the exhaustion of the fiscal capacity of the economy. Fiscal policy in the Republic of Croatia resulted in a redistribution of income, but development goals were not achieved. The fiscal policy restrictions in the Republic of Croatia are reflected in: fiscal coordination with monetary policy, poor budget planning and unfavorable projections of economic growth, trends in public revenue trends, the problem of the existing level and the structure of public expenditures and the problem of financing the deficit and the lack of a public management system. However, fiscal policy can positively affect GDP. To achieve this positive influence smart fiscal consolidation measures should be implemented such as: sustaining existing levels of public spending, gradually implementing fiscal consolidation, emphasizing the security of long-term credibility of fiscal policy, directing character and intensity of fiscal policies on the movement of the structural balance (deficit) and implementing the laws of tax reform. Long-term measures are associated with a reduction in public expenditure that is ineffective in the long-run, higher quality of so-called “desirable expenditures” and the reduction of the public sector in GDP. In addition, it is necessary to provide a strong regulatory and institutional framework for eliminating potential market failures.