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UPDATE 2-Portugal's draft 2021 budget raises investment, subsidies, in bid to return to growth

(Adds public debt projection, paragraph 10)

LISBON, Oct 12 (Reuters) - Portugal’s Socialist government unveiled its draft 2021 budget on Monday, offering more subsidies to the poorest hit by the coronavirus pandemic and betting on public investment to relaunch growth.

“This budget has very clear priorities: fighting the pandemic, protecting people and supporting the economy and employment,” Prime Minister Antonio Costa said in a video released on Twitter, adding the measures would put 550 million euros ($650 million) in Portuguese families’ pockets.

The government will increase unemployment subsidies and launch a social benefit for the poorest workers affected by the pandemic, ensuring that none have a monthly income below the poverty line of around 501 euros ($593) a month.

Doctors and nurses from the national health service who treat COVID-19 patients will receive a new risk subsidy of up to 219 euros per month. The government wants to hire 4,200 more health professionals.

Public investment is projected to increase 23.2% in 2021 to more than 6 billion euros.

Costa’s minority government hopes to use the promised added social benefits to sway the parties with which it has been negotiating - the Left Bloc, the Communists and animal rights party PAN - into supporting the budget’s passage.

“This budget has everything to be approved (in the first reading). Our availability to continue the dialogue is total,” the secretary of state for parliamentary affairs, Duarte Cordeiro, told reporters.

The draft budget sees gross domestic product growing 5.4% in 2021, after a steep slump of 8.5% projected for 2020 because of the pandemic - the worst recession in almost a century.

In 2019, the economy grew 2.2%, helping Portugal to reach its first budget surplus in 45 years, equivalent to 0.1% of GDP.

The budget envisages a lower deficit of 4.3% of GDP after this year’s estimated 7.3%. Public debt is expected to fall to 130.9% of GDP after hitting a record high of 134.8% this year.

Unemployment should decline slightly to 8.2% from this year’s 8.7%.

Exports are expected to increase by 10.9% after a sobering 22% drop in 2020, with investment expected to grow 5.3% after this year’s 7.4% fall.

Private consumption is forecast to rise 3.9% after this year’s 7.1% drop.

The draft budget also includes value-added tax discounts for hard-hit hotels, restaurants and cultural sectors.

The vote on the budget’s first reading is scheduled for Oct. 28, with the final vote due on Nov. 27. ($1 = 0.8470 euros) (Reporting by Sergio Goncalves; Writing by Andrei Khalip; Editing by Leslie Adler and Peter Cooney)

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