Numerous countries that are heavily dependent on oil and commodity exports are on the verge of a recession or have already entered one. Their government revenue is drying up and it is becoming more difficult for the buffers that are available to cushion their worsening budgetary position. They have therefore been curbing their private and public expenditure, which has hit euro-area exporters, amongst others.
The weakened growth prospects of many emerging economies have effectively (ie in tradeweighted terms) led to an appreciation of the euro, which on the one hand puts an additional brake on exports and on the other hand dampens price inflation in the euro area. In any case, the oil and commodity price slump is likely to continue to fuel economic activity on balance.