In the last three years, Bosnia and Herzegovina's public debt has gone from 30 to 40 per cent of gross domestic product and unemployment has also risen, Armitage, who is visiting the country, told Dnevni Avaz daily.
She said Bosnia was facing another strong recession, even stronger than the one in 2008-09.
In 2012, the GDP level is lower than in the first two years, she said. Given the current situation, this year's GDP growth, if there is any, could be barely 0.5 per cent. If key reforms are not undertaken, the predictions for the years ahead are very bad.
Armitage urged the authorities to reduce salaries and benefits in the public sector as well as social transfers and redirect the money saved into capital spending, the infrastructure, roads, clean water, and energy.
Also, Bosnian citizens are at the very bottom in terms of purchasing power, as shown by a recent Eurostat survey. Compared to Croatia, they can buy three times less, or nine times less when compared to Luxembourg.