Southeast Asia is on the brink of a “socio-economic crisis” caused by the COVID-19 pandemic that could reverse decades of poverty reduction, the United Nations has warned.

“The crisis threatens to destroy the livelihoods of Southeast Asia’s 218 million informal workers,” a U.N. policy brief released on Thursday said.

“Without alternative income, formal social protection systems or savings to buffer these shocks, workers and their families will be pushed into poverty, reversing decades of poverty reduction.”

The region-wide economy was expected to contract by 0.4 per cent in 2020, it said, while remittances from Southeast Asians working abroad were likely to fall by 13 per cent or $10 billion.

The paper urged nations to fix “fiscal termites”: budget-sapping problems like tax evasion, transfer pricing and fossil fuel subsidies so they can deliver large stimulus packages to help vulnerable populations and boost their economies.

Current low oil prices provided an ideal opportunity to reverse fossil fuel subsidies, it added.

In Indonesia, the region’s most populous country, fossil fuel subsidies in 2020 will exceed its entire COVID-19 social assistance and stimulus measures, the U.N. report said.

As well as boosting social welfare payments, Southeast Asian nations should prioritise higher health spending, said Armida Salsiah Alisjahbana, head of the U.N. Economic and Social Commission for Asia and the Pacific.

Six of the 11 countries in the region – including its two biggest nations, Indonesia and the Philippines – received the lowest rating for health spending on the U.N.’s five-tier human development index. Three others were on the second-lowest tier and the remaining two were on the middle tier.

The report covered the Philippines, Vietnam, Laos, Cambodia, Thailand, Brunei, Malaysia, Myanmar, Singapore, Indonesia and Timore-Leste.