Taiwan, whose largest trading partner is China, had already cut its estimate for 2020 economic growth to 2.37% last month, citing the threat from the outbreak to its trade-dependent economy.

The island is rolling out a T$60 billion ($1.99 billion) stimulus package to help soften the impact of the virus on the economy, and Tsai told a meeting of the National Security Council that another almost T$40 billion is available from other government funding.

That includes money from the Employment Stabilisation Fund and the Tourism Development Fund, she said, according to a statement from the presidential office.

But Taiwan's economic fundamentals remain good and there are still "sufficient funds", Tsai added.

Taiwan had previously said it expected the virus to affect growth only in the first quarter, but central bank governor Yang Chin-long told parliament earlier on Thursday it was likely to extend into the first six months of the year.

It will not become clear until the end of June whether Taiwan can maintain 2% economic growth this year, he added, as concerns grow that the coronavirus could deliver a damaging blow to the global economy.

"The outbreak seems rather severe," Yang said, adding that a "combination" of both fiscal and monetary policy would be more effective in dealing with the virus impact. "It's likely that (the economy) will be impacted throughout the first half."

The central bank will have a "full discussion" at its quarterly meeting next Thursday on how to react to market volatility, Yang said.

One of the central bank's main considerations will be "preventative measures", he said.

The chances of a financial crisis were not high, he added.

STOCKS FALL

Taiwan's key stock index tumbled 4.3% to a nearly seven-month low on Thursday, as global markets fell after U.S. President Donald Trump stunned investors by announcing a temporary ban on travel from Europe.

Tsai said the government would ensure market stability, and called on the Finance Ministry and central bank to pay close attention to international financial markets, especially in the United States, and "immediately respond".

Deputy Finance Minister Frank Juan told Reuters on Thursday before Tsai spoke that the island's National Stabilisation Fund was continuing to monitor financial asset movements with a view to intervening in the stock market if conditions warranted.

Taiwan has reported only 49 cases of the virus, compared to more than 80,000 in China, but it has ramped up containment efforts, suspended visits to the island for most Chinese visitors and severely limited flights to China, including Hong Kong and Macau.

Some Taiwan manufacturers, who are a key part of global technology supply chain, have already felt the pinch.

Computer maker Acer Inc's February revenue dropped 22%. Last week, Apple Inc manufacturing partner Foxconn reported its biggest monthly drop in revenue in about seven years as the coronavirus outbreak severely disrupted its business.

($1 = 30.0860 Taiwan dollars)

(Reporting by Liang-sa Loh and Yimou Lee; Additional reporting by Emily Chan; Writing by Ben Blanchard; Editing by Kim Coghill, Shri Navaratnam and Timothy Heritage)

By Liang-sa Loh and Ben Blanchard