By Josh Zumbrun 

Despite months of negative headlines -- from escalating trade conflicts to European political turmoil to emerging-market currency declines -- global economic growth has remained robust.

The International Monetary Fund said the global economy is on course to grow 3.9% this year and next. That is unchanged from its April forecasts, and would represent the best back-to-back years of growth since 2010 and 2011 when the world enjoyed a fleeting snapback from the financial crisis.

Despite the headline figures, the IMF's forecasts released Monday in Washington struck a downbeat tone, highlighting that growth has become less evenly spread among countries compared with last year. It noted, in particular, the major risk that a U.S.-led escalation of trade confrontations would pose to the global economic outlook.

The "risks to the outlook are mounting," the IMF said.

The IMF's chief economist Maurice Obstfeld called the trade tensions "the greatest near-term threat to the world's growth." He said an IMF model suggests that if current trade policy threats are realized, it would reduce global growth 0.5% below current projections in 2020 -- a sum amounting to hundreds of billions of lost economic output.

"Trade actions to date, while they are indeed broadly negative, they frankly apply to a rather small range of exports," said Mr. Obstfeld.

The Trump administration has threatened to apply tariffs to hundreds of billions of Chinese imports and automobile imports. But for now, the major actions it has taken have been to impose tariffs on imported steel and aluminum, about $34 billion of Chinese goods, and washing machines and solar panels.

Mr. Obstfeld noted that while the U.S. has applied new tariffs to all its major trading partners, most of those trading partners are not in conflict with each other.

The IMF forecast the U.S. economy will grow 2.9% this year, unchanged from its April estimate. It lowered its forecasts for the eurozone and Japan by 0.2 percentage points each. Canada's outlook was unchanged. Other advanced economies strengthened by 0.1 percentage point.

The forecast for emerging-markets growth was unchanged overall. Declines in the economic forecast for Latin America, where currencies have been hardest hit, have garnered the most attention. But that has been partially offset by gains in growth elsewhere, especially in the oil-producing Middle East, which is benefiting from higher crude prices.

"After the euphoria of 2017, the outlook has undoubtedly become more clouded," said Ben May, director of global macro research for Oxford Economics. "But we remain cautiously optimistic despite the recent global protectionist spats."

Recent data "points to only a moderate loss of growth momentum from a solid starting point," Mr. May said.

Mr. May noted that global purchasing managers' indexes have remained firmly in positive territory. Labor-force participation rates across advanced economies have continued rising, providing a boost to labor supply. Some measures of productivity growth appear to be turning upward after long doldrums. Surveys of investment intentions show many businesses retain a bright outlook.

Write to Josh Zumbrun at Josh.Zumbrun@wsj.com

(END) Dow Jones Newswires

July 16, 2018 17:37 ET (21:37 GMT)

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