Private deposits in Jordan's banking sector were up 10 per cent year-on-year at the end of May but growth in recent months has slowed sharply, central bank data showed on Tuesday.

The deposits, mostly dinar-denominated assets that exclude public funds, stood at JD16.664 billion ($23.5 billion) end of May, up 2.4 per cent since the end of December 2009.

They stood at JD15.162 billion at the end of May 2009.

Deposit growth has eased substantially since the end of last year, a trend analysts attribute to a delayed reaction to the global recession last year which continues to hurt domestic demand, worker remittances and foreign investments.

Bankers attribute last years' high growth rates to strong inflows into local currency assets encouraged by a CBJ policy to allow a wider interest rate differential against the dollar in favour of the dinar.

This had encouraged banks and depositors to keep their funds in dinar-denominated assets.

A main plank of monetary policy is the defence of the dinar, which is pegged to the dollar, a policy that the International Monetary Fund (IMF) says has served the Jordanian economy well.

Even Jordanian expatriates whose earnings were in foreign currencies switched part of their savings into the dinar, attracted by interest as high as four per cent, bankers say.

Deposits grew 13.7 per cent last year. In contrast, loans grew just 1.5 per cent, after surging 14.2 per cent in 2008.

Loan growth outpaced deposit growth during a boom period of accelerated economic growth that saw rapid credit expansion when the country's free market reforms attracted billions of dollars of investments by both local and foreign investors, bankers say. – Reuters