The Irish Republic is expected to become the most expensive country in the eurozone later this year.
Irish prices can be hard to swallow
A report published on Thursday by trade advisory body, Forfas, blamed the Irish government's high VAT rates and other indirect taxation for many of the price rises.
With pints of beer costing almost five euros, Ireland will top Scandinavian rivals such as Finland, the most expensive eurozone country last year, Forfas said.
The report found that pub and restaurant prices drove up inflation and accounted for nearly 30% of people's outgoings.
Alcohol and tobacco were next highest, followed by transport costs.
It is likely that Ireland will become the most expensive country in the eurozone during 2003
"Ireland is now estimated to have been the second most expensive country in the eurozone in 2002 for consumer prices, marginally behind Finland," Forfas said in its study, based on figures compiled by accountants PricewaterhouseCoopers.
"It is likely that Ireland will become the most expensive
country in the eurozone during 2003," it added.
The study found "particularly noteworthy... the very
expensive nature of alcohol, tobacco and residential rents in Ireland".
"It is clear that Ireland's rapid rise towards the top of
the European pricing league could pose a significant threat to maintaining the economic successes of recent years," Forfas chief executive Martin Cronin said.
The study found price increases for consumer goods in Ireland sharply outpaced other countries in the eurozone, resulting in an overall consumer price level 12% higher than the eurozone average.
As the "Celtic Tiger" boom of the 90s has cooled, prices have continued to soar, there have been numerous warnings of late that Ireland is losing the competitive edge which lured big American and European investments to the Irish Republic.
Ireland recently dropped to 11th from ninth place in a list of the world's most competitive smaller countries compiled by the Swiss business school IMD.
The news has negative implications for tourism in the Irish Republic.
It is also embarrassing for a government which stated that targeting inflation was one of its main economic objectives.