Taiwan called off its largest Lunar New Year lantern festival for the first time on Tuesday, as authorities rushed to stem a Covid-19 cluster in one of the few places to survive the pandemic largely unscathed.

The Taiwan Lantern Festival is held in different locations each year, and was set to take place in the northern city of Hsinchu next month.

But the three-decade-old event, which typically sees up to a million visitors, was cancelled after four coronavirus cases were linked to an outbreak at a state-run hospital.

"It is difficult to control the crowd in an open space in the city," cabinet secretary-general Li Meng-yen told reporters.

Other smaller-scale lantern festivals have also been cancelled, including in Taoyuan, where the recent cluster of infections was detected.

Taiwan has been praised for its pandemic response, with fewer than 870 cases and seven deaths so far.

Its success has been partly linked to its decision to halt foreign arrivals and place strict quarantine measures on the small numbers who could still travel to the island.

At one point Taiwan recorded 253 straight days without any local infections. 

But a widening hospital outbreak that surfaced last week when a doctor treating a Covid-19 patient returning from abroad tested positive has caused alarm.

"The number of confirmed cases is higher than our expectations. We need to continue working hard and show concerns for our medical workers," said health minister Chen Shih-chung.   

Over the last fortnight five other doctors and nurses as well as two of their family members and a Vietnamese caregiver have contracted the virus both in and outside the hospital, bringing the cluster's total infections to nine. 

One of the new patients was a woman -- the daughter of a nurse -- working at a Mos Burger outlet in a Taoyuan metro station, according to the Central Epidemic Command Center (CECC).

Taoyuan General Hospital will partially evacuate 220 patients to lower risk of infection and ease the burden on its staff, Chen said. 

So far 353 employees at the hospital have started a two-week quarantine and health authorities are tracing and testing all contacts of the new cases, according to the CECC.