GENEVA (AP) — The World Trade Organization raised its outlook for global goods trade this year slightly, but cautioned Thursday that increasing geopolitical tensions and uncertainty over economy policy pose “substantial” risks to its forecast.

The Geneva-based WTO projected that global goods trade will increase by 2.7% this year, compared with the 2.6% it forecast in April. But it predicted growth of 3% next year, down from the 3.3% it forecast previously. Last year, the volume of world merchandise trade was down 1.1%, pushed lower by high inflation and rising interest rates.

The global trade body cautioned that “rising geopolitical tensions and increased economic policy uncertainty continue to pose substantial downside risks to the forecast.”

Still, it pointed to a 2.3% year-on-year increase in global merchandise trade in this year's first six months and noted that inflation had fallen far enough by mid-year for central banks to start cutting interest rates.

“We are expecting a gradual recovery in global trade for 2024, but we remain vigilant of potential setbacks, particularly the potential escalation of regional conflicts like those in the Middle East,” WTO Director-General Ngozi Okonjo-Iweala said in a statement. “The impact could be most severe for the countries directly involved, but they may also indirectly affect global energy costs and shipping routes.”

The WTO said there is “some limited upside potential” to its forecast if interest rate cuts in advanced economies fuel stronger-than-expected growth without reigniting inflation.