TAIPEI (REUTERS) - Taiwan's government proposed on Thursday (May 13) an extra NT$210 billion (S$10 billion) in spending to help the economy deal with the Covid-19 pandemic, as it reported 13 new domestic cases amid a rare spike in infections that has spooked the stock market.

Early and effective prevention steps, including largely closing its borders, succeeded in shielding Taiwan from the worst of the pandemic. The island of 24 million people has reported just 1,256 infections so far, most of them imported.

But markets and the government have been on edge since renewed domestic outbreaks began late last month, with 16 new domestic cases announced on Wednesday setting a record daily high.

The benchmark stock index fell 1.5 per cent on Thursday, though it also tracked losses in the United States overnight.

Mr Chu Tzer-ming, head of the Directorate-General of Budget, Accounting and Statistics, said it was proposing another NT$210 billion to add to previously announced stimulus spending worth NT$420 billion that will need parliamentary approval.

"We will see how the pandemic develops and what each department's needs are," he said.

Contact tracing

The government has now identified the source of the new domestic infections, linking them via DNA sequencing to an earlier outbreak at an airport hotel and pilots at Taiwan's largest carrier, China Airlines.

However, they do not know how the people in the latest cluster got infected, and are stepping up contact tracing.

Speaking to reporters, President Tsai Ing-wen called for calm.

"Fighting the pandemic is like fighting a war," she said.

"I'd like to urge people that as long as supplies are sufficient, there's no need for panic buying," Ms Tsai added, describing people who have rushed to buy instant noodles and toilet rolls this week as "worrying too much".

The government will work to ensure the stability of the financial markets, she said.

More vaccines are due to start arriving from overseas from June, Ms Tsai added.

Cities around Taiwan are tightening restrictions to prevent the spread of community infections.

New Taipei City, which surrounds the capital Taipei and where some of the new cases have been reported, has ordered libraries and Internet cafes closed, while Taipei has ordered a limit of 100 people at a time in gyms.

Taipei Mayor Ko Wen-je, writing on his Facebook page late on Wednesday, urged people not to worry.

"Please don't panic... Taiwan has abundant medical capabilities, and the number of severely ill patients has not increased rapidly," wrote Mr Ko, who is a medical doctor himself.

Taiwan has never gone into a complete lockdown.