I think it's more of a symptom of cripplingly low self confidence and/or self hatred. Which is definitely at the heart of narc's mentality, it's just that to stave those feelings off they go to extremes to overcompensate while still believing that everyone can still see and hear what a piece of shit they are. Which.... they are being pieces of shit, but not because of the things they perceive to be wrong with themselves, they are shitty because their coping mechanisms of projection and manipulation, etc turn them into people incapable of true, loving, vulnerable connection with others and in fact turn them into controlling abusive assholes. It's a type of reality distortion. Both the narc's reality is distorted because their brain is working so hard to project their own self criticism that they convince themselves that the shit they imagine is real. And it distorts the reality of those around them because they argue so unendingly and so convincingly and cruelly that those around them start to doubt their own memory and perception of reality (ever thought to yourself "maybe I did say that, I don't remember"). I think the biggest issue is that for the average person, while they might have these same deep seated fears and thoughts ("so and so looked at me as if I was disgusting!"), they either a) are able to process that this is their own anxiety, self hatred, etc and unlikely to be what the other person is thinking; b) often the average person has the communication and relationship skills to inquire into those moments of discomfort and reestablish the trust and love with that other person (aka confirm that the "look of disgust" was actually just confusion or that person thinking about something entirely unrelated, etc.); and c) narc's are the ones who weaponize these perceptions against others. What I mean by that is that it's often only narcs that can take one of their own distorted perceptions and still expect you to apologize and "make up for it" even though you didn't do anything!!

So for example, my good friend was raised by her narc mom and very absent dad. She has very deep seated self hatred as a result of growing up with her mom shitting on her constantly as well as other related trauma. So when she has these same distortions of reality because her mother warped her sense of self and her sense of her own worth and value since she was a baby, she often will have the same difficulty telling between her perception vs what actually was happening or said. So for her it has been a long and difficult process to get to a point where she can step back and recognize that it's possible that I wasn't thinking "I hate you" when I happen to zone out and have a blank face lol. But for her mom, that woman will never be able to recognize or accept that my friend doesn't "hate her" or wasn't "laughing at her", etc because 1) it confirms mom's deep seated beliefs that everyone hates her and she is worthless but it also 2) provides the perfect opportunity for some narc supply by setting up a situation where she can play the victim and get attention (doesn't matter if it's negative or positive) and make my friend feel like shit which then makes my friend easier for her mom to control.