UPDATE 1-Portugal approves 2021 budget with more investment for recovery

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LISBON, Nov 26 (Reuters) - Portugal's parliament passed on Thursday the minority Socialist government's 2021 budget, which bets on a steep rise in public investment to relaunch growth of the coronavirus-battered economy while also increasing subsidies and pensions.

In its final reading, the document was approved by 108-105 votes with 17 abstentions, which included the Communist Party, a former ally of the Socialist government in the previous legislature.

The only 'yes' votes for the bill, which envisages a deficit reduction to 4.3% of gross domestic product from this year's estimated 7.3%, came from the Socialist bench.

"This is a good budget ... a budget for a difficult year in which the effects of the pandemic on public health and the economy will be felt even more," Socialist bench leader Ana Catarina Mendes told parliament, criticising another former ally, the Left Bloc, for voting against it.

Aiming to support economic recovery after the worst recession in almost a century caused by the pandemic, the budget envisages a steep 23% rise in public investment to more than 6 billion euros, especially in healthcare and infrastructure.

It will put an extra 550 million euros in families' pockets through boosting unemployment subsidies and pensions, providing a new social benefit for the poorest workers, and reducing value-added tax on electricity.

The government expects the tourism-dependent economy to grow 5.4% after this year's projected slump of 8.5%. Unemployment should slip to 8.2% after jumping to 8.7% this year. The unemployed population soared 45% to 400,000 in the third quarter. (Reporting by Sergio Goncalves and Andrei Khalip Editing by Ingrid Melander)