Lael Brainard discusses the importance of investing and participating in the global economy at a breakfast for the National Association for Business Education.  (Summer Delaney/Medill)

Lael Brainard discusses the importance of investing and participating in the global economy at a breakfast for the National Association for Business Education. (Summer Delaney/Medill)

WASHINGTON—The Gross Domestic Product will shrink by 0.5 percent this year due to the sequester of federal funds, Treasury Undersecretary of International Affairs Lael Brainard said Tuesday.

In light of the fiscal climate, Brainard urged legislators and leading economists to continue expanding opportunities for businesses and workers overseas.

“Global growth is still weak and vulnerable to the downside, and we need to do more to strengthen global demand and to rebalance the pattern of growth globally,” she said at a Washington breakfast assessing global economic policies and challenges.

According to the undersecretary, the U.S. economy is growing faster than many other countries with advanced economies. The private sector added more than 6.1 million jobs in 35 months, she said.  However, Brainard warns that the sequester that began on March 1and promises $85 billion in budget cuts this year is a “blunt instrument” that will be harmful long term.

In regard to relations overseas, the Treasury officer believes that countries boasting a surplus as well as countries in a deficit have an important role and responsibility in determining the global economy’s future.  She advises that European nations must continue to stabilize their economies while addressing unemployment rates and rebalancing the Euro.

Concerns were also voiced over countries, specifically China, with tightly managed exchange rates.  Brainard said the world’s measurements of currency must be mutually compatible or else it, “create[s] inevitable tensions that fuel protectionist pressures.”

In February, G-20 countries, meeting in Moscow, began drafting fiscal repair and reform plans.  Up to this point, Brainard said that policy adjustments have relied too much on “compressed demand in deficit economies.”

“Growth will not be as resilient or stable as it needs to be if there is a return to pre-crisis patterns of global demand growth,” Brainard said.  “Policies in all countries need to work together to demand those goals.”

Moving forward, Brainard said that the Treasury Department will cooperate with other U.S. government agencies and also other countries to create a global economy that is beneficial for all participating nations.

“We will continue to work through the IMF [International Monetary Fund], G-20 and in bilateral discussions to ensure that the pursuit of growth in each of our countries advances growth across our countries.”