UPDATE 2-Canada says budget deficits will be larger than previously forecast

Kelsey Johnson and David Ljunggren

(Adds details from release, background)

OTTAWA, Dec 16 (Reuters) - Canada's budget deficits will be larger than forecast for the next five years, Finance Minister Bill Morneau said on Monday, vowing to keep on investing in the economy given Canadians' concerns about the future.

The Liberals of Prime Minister Justin Trudeau came to power in late 2015 promising to run a series of limited deficits but the shortfalls have ballooned and Ottawa will now not say when it might return to balance.

Morneau, unveiling his first budget update since the Liberals lost their majority in an October election, said the 2019-20 budget deficit was forecast to be C$26.6 billion ($20.2 billion), larger than the C$19.8 billion ($15 billion) he had projected in March.

The deficit is set to peak at C$28.1 billion ($21.36 billion) in 2020-21, before falling to C$11.6 billion ($8.6 billion) in 2024-25.

"Note that while this will make some headlines, the deficit this year and next will still be a moderate 1.2% of GDP," said Avery Shenfeld of CIBC Economics.

Morneau said the economy was doing well and noted Canada was one of the few developed nations to have a AAA credit rating.

Reasons for the larger than forecast deficits include tax cuts and spending measures, such as a boost in benefits to families with children.

The figures also take into account the fact that low interest rates have made pension liabilities higher.

Morneau said that while the economy was still growing, Ottawa realized there were too many people working harder to make ends meet.

"Our view is that the appropriate response right now to the economic situation is to keep investing," he told reporters, adding Ottawa would remain vigilant about future challenges.

The government's growth forecast for 2019 remained unchanged at 1.7%, while Canada's debt-to-GDP ratio edged up to 31.0% in 2019-20.

The update is likely to be attacked by the official opposition Conservative Party, which accuses the Liberals of irresponsible spending.

But the Conservatives are in some disarray after leader Andrew Scheer announced last week he was quitting and are very unlikely to bring the government down.

The right-leaning Canadian Taxpayers Federation, which campaigns against government waste, accused the Liberals of fiscal mismanagement.

"This government needs to get the deficit under control as quickly as possible and put an end to its reckless spending spree," it said in a statement. (Reporting by Kelsey Johnson, Editing by David Ljunggren, Bill Berkrot and Chris Reese)