UPDATE 1-Slovenian urges reforms to ensure long-term growth

(Updates with quotes, details, background)

LJUBLJANA, Dec 15 (Reuters) - The Bank of Slovenia urged the government on Thursday to pursue structural reforms including cutting red tape and enhancing privatisation as a way to ensure the longer-term continuation of current positive trends.

Local banks, both state-owned and private, also had to reduce their level of bad loans, it said in a report.

“The situation of the economy and the financial sector in Slovenia is stimulating in 2016,” it said.

“Economic activity continues to grow, the banking sector is resistant to possible shocks. However, structural reforms are needed to retain these good trends.”

As a part of the government’s reform drive, the parliament was due later on Thursday to pass new legislation aimed at attracting investment of at least 100 million euros by Canadian car parts maker Magna International, which is considering expanding in the region.

The new law will speed up the purchase of private land in northeastern Slovenia where Magna might build a new factory.

The central bank said a reform of public administration was needed to attract more foreign investment and more investment in research and development would improve productivity.

It also called for more privatisation while urging state-owned firms to improve their management.

Slovenia has been reluctant to sell major state-owned companies and banks so the government still controls about 50 percent of the economy.

The bank said local banks had to further reduce their level of bad loans, which has already dropped to 6.4 percent of all loans in September from as much as 18.1 percent of all loans in November 2013, when Slovenia was in severe financial crisis.

In 2013, the previous government had to pour more than 3 billion euros into local banks to prevent them from collapsing under a large amount of bad loans. This helped the country to narrowly avoid an international bailout.

After that bank overhaul, Slovenia returned to growth in 2014. The government expects the export-oriented economy to expand by 2.9 percent next year versus growth of 2.3 percent seen in 2016. (Reporting by Marja Novak; Editing by Tom Heneghan)