Taiwan parliament approves infrastructure stimulus plan

TAIPEI, July 5 (Reuters) - Taiwan's parliament on Wednesday approved an infrastructure stimulus plan aimed at bolstering domestic demand and rebalancing the island's economy away from its heavy reliance on exports.

The plan, worth T $420 billion ($12.6 billion), was only half the size of the original stimulus plan announced by the cabinet in March, part of a political compromise to get it through parliament.

It will target rail, water, green energy and the digital economy. The cabinet has said other projects will aim to even out the urban-rural divide.

Opposition lawmakers had criticized the original plan as going beyond the four-year term limit of Taiwan President Tsai Ing-wen and her ruling Democratic Progressive Party.

Taiwan's parliament, the Legislative Yuan, approved the plan for a period of four years and agreed to review it at a later date.

Taiwan's presidential office said in a statement after the vote that the plan would bolster infrastructure investment and upgrade the economy, adding that it hoped the budget review for individual projects would be "rationally discussed."

Taiwan's trade-reliant economy is showing signs of recovery, but it is highly vulnerable to protectionist policies from U.S. President Donald Trump and increasing competition from Chinese manufacturers, as well as political tensions with Beijing.

In late May, Taiwan's government raised its 2017 economic growth outlook to a three-year high of 2.05 percent, citing export-led gains. The government said the outlook did not factor in the stimulus plan because it had not yet won parliamentary approval.

Analysts said they expected the stimulus plan to provide a limited boost to economic growth.

"In fact, the revision of the infrastructure stimulus plan has limited impact on our forecasts for Taiwan's 2017-18 growth outlook," said Ma Tieying, an economist with DBS in Singapore. ($1 = 30.4840 Taiwan dollars) (Reporting by J.R. Wu; Editing by Gareth Jones)