Public Sentiment a Powerful Driver of Economic Performance
By: Solomon Nartey Tetteh
Economic Analyst Emmanuel has emphasized that beyond hard data and strong economic fundamentals, public sentiment plays a decisive role in shaping the performance of an economy.
Speaking on the concept of behavioural economics on Business Breakfast on Zed 101.9FM, Mr. Boateng explained that an economy does not operate only on figures and indicators but is first formed in the minds of the people.
“The economy of a country is first in the minds of its people. Sentiments act as the economy’s psychological engine. Break that engine down, and the economy will know,” he said.
According to him, even economies with strong fundamentals can experience stalled growth if negative sentiments dominate, while optimism can significantly accelerate economic activity.
He noted that managing an economy therefore requires a dual approach, working on real economic fundamentals while also carefully managing how citizens perceive economic conditions.
“You need to be able to manage what people think about the economy. You need to manage the psychological engine of economic agents as you do the hard work on the ground,” Emmanuel stated. “If you neglect one, you will be in trouble.”
The analyst stressed that public perception is especially critical in the management of key indicators such as inflation. He explained that inflation expectations strongly influence pricing behaviour among traders and service providers.
“When sellers have a certain impression about what prices will be in the future, it affects how they price today,” he said. “Inflation expectations in this country play a major role.”
Mr. Boateng said in some cases, economic conditions may be improving, yet prices remain high because traders believe the gains are temporary.
“Sometimes things are even getting better, but people refuse to reduce prices because they feel what they are seeing is quite ephemeral and will not last long,” he explained.
He described this phenomenon as the “psychological economy,” warning that failure to address it could undermine economic recovery efforts.
Mr. Boateng therefore called on government and economic managers to pay closer attention to public confidence and expectations, noting that effective communication and trust-building are just as important as policy implementation.
“The psychological economy is very important, and government needs to be able to work on that,” he stressed.
