TAIPEI- Taiwan's government proposed on Thursday an extra T$210 billion ($7.5 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% on Thursday, though it also tracked losses in the United States overnight.

Chu Tzer-ming, head of the Directorate-General of Budget, Accounting and Statistics, said they were proposing another T$210 billion to add to previously announced stimulus spending worth T$420 billion, which will need parliamentary approval.

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

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 Ltd 2610.TW .

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," 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, Tsai added.

Taiwan has millions of vaccines on order from Moderna Inc and AstraZeneca Plc, though only a small number of the latter's have arrived so far.

($1 = 27.9310 Taiwan dollars)

(Reporting by Jeanny Kao and Ben Blanchard; editing by Richard Pullin and Gareth Jones) ((ben.blanchard@thomsonreuters.com;))