The economy should continue to experience moderate growth, according to the minutes from the last monetary policy committee meeting of the Central Bank of the Republic of Turkey (CBRT) on Nov. 24, released late Tuesday. The minutes explain the reasoning behind the committee's interest rate decision, which, on Nov. 24, was to hold interest rates at current levels of 7.5 for the one-week rate for bank lending and 10.25 percent for the overnight rate.

The committee expressed confidence in continued growth, based on solid domestic demand and increasing exports. But concerns about inflation pressure, largely due to Turkish lira volatility, and the weak global economy caused the committee to vote to hold interest rates at a relatively high level.

"The recent recovery of the consumer confidence index and the improving expectations for investment and employment are likely to bolster domestic demand," the committee said. But the committee noted that exports are becoming a more important driver of growth than domestic demand. "The non-gold exports volume index rose in the third quarter, whereas the imports index fell in line with moderate domestic demand. Therefore, the growth composition appears to be shifting in favor of net exports thanks to the rising demand from EU countries," the committee said.

Industrial production continues to increase. This, combined with increased exports and a reduction in consumer loans, should lead to further improvement of the current account balance, the committee added. Employment is also improving, according to the committee. "The average annual non-farm employment growth equaled 3 percent in the January-August period. Survey indicators for industrial employment also point to a recovery. Given the economic outlook, the modest growth in services and construction employment is expected to continue," the committee said. But concerns over global growth have caused financial markets to remain volatile, which is affecting investment in all emerging markets as well as pushing currencies lower in developing countries, the committee said.

"To sum up, domestic demand appears to follow a more moderate course in the second half of the year, while external demand makes an increased contribution to growth. The recovery in the European economy affects external demand positively, whereas geopolitical tensions pose a downside risk to external demand," the committee said.