UPDATE 3-Canada to spend billions more on infrastructure as growth lags

* Canada to ramp up infrastructure spending

* Gov’t taps prudence fund as growth lags forecast

* Canada will set up infrastructure bank (Adds Ottawa raising investment threshold sooner than planned, making it easier for firms to hire skilled workers)

OTTAWA, Nov 1 (Reuters) - Canada will boost spending on infrastructure projects by an extra C$81 billion ($60.49 billion) over the next 12 years in a bid to revitalize a limping economy, Finance Minister Bill Morneau said on Tuesday.

The Liberal government, trying to deal with a prolonged oil slump that has slashed revenues, is committed to pouring a total of C$187 billion into infrastructure between now and 2027-28. In March, it had promised to spend C$120 billion over the next decade.

“This is unprecedented in our history. And it comes at a time when the need is great,” Morneau told the House of Commons as he presented a fiscal update.

Ottawa will also set up an infrastructure bank and give it access to C$35 billion.

“The economic situation we’re in is challenging; global growth is challenged,” Morneau told reporters.

Morneau cut the forecast for 2016 growth to 1.2 percent from the 1.4 percent he had predicted in his March budget. He put 2017 growth at 2.0 percent compared with an initial estimate of 2.2 percent.

The government said the budget deficit for the 2016-17 fiscal year will be C$25.1 billion, compared with the C$29.4 billion predicted in March. But this is only because Morneau applied a C$6 billion annual prudence fund to bring the final figure down from $31.1 billion.

Still, the deficit numbers were lower than some analysts had forecast. The Canadian dollar and bonds showed little reaction.

Ottawa plans to tap the prudence fund every year until 2020/21, when it is expecting a deficit of C$16.8 billion. In March, Morneau had indicated the budget might be balanced by then.

But pressed by reporters as to when the shortfall would be eliminated, Morneau said he wanted to focus on investments.

Ottawa will lift the threshold at which it scrutinizes foreign takeover bids from C$600 million to C$1 billion starting next year, rather than in 2019 as initially planned.

It will also introduce a strategy to make it easier for Canadian firms to hire talented foreign workers, in part by cutting lengthy visa processing delays.

Michael Dolega, a senior economist at TD Bank, said low borrowing costs and a moderate debt-to-GDP ratio meant this was a good time for the government to act.

“My main concern as an economist is just to make sure that this money ends up being productive for the country,” he said.

($1 = 1.3391 Canadian dollars)

Additional reporting by Leah Schnurr in Ottawa and Fergal Smith, Matt Scuffham and Morgan Sharp in Toronto; Editing by Lisa Shumaker and Dan Grebler