The war in Ukraine is set to cause inflation rates to increase further again.
As the cost of living crisis continues to escalate, economic experts are now saying that Irish wages will struggle to keep up with the growing rates of inflation.
The Economic and Social Research Institute (ESRI) published the analysis in its Quarterly Economic Commentary for Summer 2022.
Unemployment is set to fall from 4.9% at the start of the year to 4.2%, and wage growth is to continue to rise by 3.5% by the end of the year.
However, the current pace of inflation means that on a real basis, wage rates are set to fall in 2o22, meaning Irish workers will be taking home less money.
Experts say, however, that if unemployment continues to fall below 4%, it will be a historic low for Ireland, which could mean wage rates rising again.
Inflation is set to increase further again in the country, with food and energy markets taking the brunt of the increase due to the ongoing war in Ukraine.
Irish house prices are also set to fall by 2% thanks to changes in European Central Bank policy surrounding interest rates, although other factors such as lack of supply will continue to put pressure upwards on prices.
Despite significant challenges both at home and abroad, Irish economic growth is set to continue in 2022, thanks in part to a strong export sector.
ESRI experts believe that Irish GDP will grow by 6.8% this year.
“We still expect the domestic economy to grow strongly in 2022 and 2023," said Kieran McQuinn, one of the authors of the report.
"However, there are significant downside risks to the growth outlook with greater inflationary pressures being the most pressing”.
Fellow author Conor O'Toole warned policymakers that "the challenge now will be to respond to higher inflation against a backdrop of tight labour markets and rising interest rates".