Imagine people in country A (this country already have its economy, production, import and export etc) decided to switch to BTC only. Since they are trading with another countries they have all production costs in BTC and they are selling everything for BTC while country B (which pays with their own money) is having continuously increasing prices. In the end, you only your products way overpriced in the world market just because you have switched to BTC.
The difference between competitive production costs within your country, or your products becoming overpriced abroad is perhaps not about nominal inflation or deflation, but how people react to it. Who has pricing power, will workers go on strike and demand
more increase than current inflation, or will they just do nothing about it. In deflationary spiral, the country could also buy products and labour for cheap from countries that have printed too much fiat. In the end, nothing will be permanently overpriced due to deflation.