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.

(AP)