Congruence of credit and business cycles in Slovenia and implications for the banking sector

In this article we explore cyclical developments in credit and business cycles in the Slovenian economy, which were to a great extent determined by the impact of the global financial and economic crisis in 2009 and 2010 and subsequently by a severe banking crisis in Slovenia in 2013. We measure credit cycles by a composite indicator and individual financial variables reflecting the dynamics in credit activity in Slovenian banking sector. Business cycle is measured by quarterly GDP growth rates. The credit and business cycle found not to be synchronized and the intensity of the cycles’ amplitudes happened to vary throughout the observed period. Additionally, we also examined the relationship between cyclical behaviour in banks’ credit activity and cyclicality in selected performance indicators of banks in Slovenia.