By Collins Ofoe KWASHIE
In today’s global economy, one often overlooked yet powerful force drives growth: confidence.
When consumers, investors, and businesses believe in the stability and potential of the economy, they are more inclined to spend, invest, and innovate.
This collective optimism doesn’t merely reflect economic conditions—it actively shapes them.
What drives economic confidence?
Economic confidence is built on a foundation of strong fundamentals. Key indicators such as steady GDP growth, low inflation, and robust employment rates signal a healthy economy.
For instance, IMF’s World Economic Outlook (WEO) forecast which includes tariff announcements between February 1 and April 4 by the US and countermeasures by other countries, reduces the fund’s global growth forecast to 2.8 percent and 3 percent this year and next, a cumulative downgrade of about 0.8 percentage point relative to the January 2025 WEO update.
Government policies also play a crucial role. The IMF notes that fiscal buffers have eroded in many countries, leaving them more vulnerable to economic shocks . Transparent governance and effective regulation foster trust in institutions, reinforcing confidence.
Confidence in action
When confidence is high, economic activity flourishes. Consumers are more likely to make significant purchases, businesses invest in expansion, and investors commit capital. This behavior propels the economy forward. However, when confidence wanes, as seen in recent declines in consumer confidence indices in the U.S. and UK, economic activity can slow, leading to reduced spending and investment .
The amplifying effect of confidence
Research indicates that confidence doesn’t just reflect economic conditions—it amplifies them. A study published in the *International Review of Economics & Finance* found that confidence positively affects economic growth, especially during recessions.
The impact of both consumer and business confidence on economic growth is significantly amplified during periods of economic slack, supporting the notion that governments should give more consideration to confidence when trying to stimulate the economy .
A Cornerstone of sustainable growth
Confidence is not merely a sentiment—it is a cornerstone of sustainable economic success. It enables long-term planning, supports financial stability, and encourages productive risk-taking.
For policymakers and business leaders, fostering confidence through sound policy and communication is as important as setting interest rates or balancing budgets.
Looking ahead
As the global economy navigates uncertainties—from geopolitical tensions to rapid technological advancements—confidence remains a critical asset. Building and maintaining it will require not only strong economic management but also a clear, consistent vision for the future. When people believe in the economy, they build it—together.
Collins is a Banker
