Inflation is expected to peak at 6.75 percent in the second quarter of this year, according to new Department of Finance figures.
However, it also warns inflation could hit highs of more than nine per cent if oil prices increase by half, and gas prices rise by 75 percent.
The Stability Programme Update notes the level of employment is at its highest ever figure, with the number of people dependent on Government supports dropping.
The update lists fifteen major risks to the economy including the war in Ukraine, Brexit, supply chain disruption and corporation tax changes.
While the cost of an aging population is beginning to bite.
The Government estimates an extra 7 billion euro a year will be needed to maintain existing public service levels by the end of this decade.