BANGKOK (Reuters) - Thailand is heading for a political showdown, with anti-government protesters aiming to sabotage an election by shutting down Bangkok next week, deepening a crisis that has divided the country and looks set to squeeze economic growth this year.
Prime Minister Yingluck Shinawatra faces swelling opposition in Bangkok ahead of the February 2 election in which her supporters in the rural north and northeast are expected to return her to power - if the vote can go ahead.
Thousands of demonstrators marched through Bangkok on Sunday as a prelude to rallies starting on January 13, when they plan to block government offices and occupy key intersections for days in a bid to force out Yingluck and scuttle the poll.
The protesters accuse Yingluck of being a puppet of her self-exiled brother and former premier, Thaksin Shinawatra, a man they say is a corrupt crony capitalist who used taxpayers' money to buy his electoral support with populist giveaways.
They want an appointed "people's council" to oversee a vague reform platform, which includes electoral changes and decentralising power over a 12-month period before any election.
Commerce Minister Niwattumrong Boonsongpaisan said on Monday 2014 growth could be 3.0 percent to 3.5 percent if the protests continued, mainly due to a delay to $65 billion worth of infrastructure spending, which the government had hoped would offset sagging exports worth about 60 percent of the economy.
The government had forecast GDP growth of 4.0 percent to 5.0 percent this year. On December 26 the finance ministry forecast 3.5 percent if the political deadlock continued.
Thai markets are expected to face pressure over the growing uncertainty. The baht hit another four-year low against the dollar on Monday, and the benchmark .SETI stock index fell to its lowest since August 2012 during early trade.
It closed up 0.5 percent, helped by late buying in some battered big-caps. The index has lost 15 percent since early November, when the latest crisis began.
Yingluck, 46, is refusing to postpone the poll, which she says would be unconstitutional. Any election delay could heighten the uncertainty and make it harder for her caretaker government to function.
On Monday, she urged protesters to consider the economy.
"I ask protesters not to close government offices on January 13," she told reporters. "Many countries have indicated they are worried that if the protests do not end, Thailand will be affected in many ways, particularly in terms of its economy."
Yingluck enjoyed two smooth years in power until November, when her Puea Thai Party miscalculated by trying to force through an unpopular amnesty bill that would have nullified a 2008 graft conviction against Thaksin and allowed him to return a free man. It caused outrage and protests erupted.
The battle, an outbreak of turmoil stretching back eight years, broadly pits Bangkok's middle classes, southerners and an old-money oligarchy of royalists, conservatives and generals threatened by Thaksin's rise, against his mostly rural supporters and tycoons who prospered under his rule.
Despite her determination to press ahead, Yingluck's position becomes more precarious the longer the protests drag on, with intervention by the judiciary or the military a possibility to break the deadlock.
Thailand's military has launched or attempted 18 coups in 81 years of fragile democracy, including the overthrow of Thaksin in 2006, but has also intervened in politics behind the scenes.
The military isn't rallying behind Yingluck. Its top general, Prayuth Chan-ocha, last month said "the door was neither open nor closed" when asked about intervention to defuse the crisis, a break from his rejection of coup suggestions.
The National Counter Corruption Commission may also decide on Tuesday whether to press charges against 381 former lawmakers for trying to change the constitution to transform the Senate from a semi-appointed to a fully elected chamber, which the Constitutional Court in November ruled was unlawful.
It is unclear what the fallout would be from any subsequent ruling against the former legislators.
It has been a tough year-end period for Yingluck, who has avoided Bangkok for much of it, choosing instead to tour her Puea Thai Party's north and northeast strongholds.
Her "red shirts" supporters plan rallies in dozens of provinces to run simultaneously with the Bangkok blockade by their rivals. The red shirts have threatened pandemonium if the election is derailed or if the military intervenes.
Protests have been mostly peaceful, though face-offs between riot police and anti-government protesters turned ugly last month, with scores hospitalised and three people shot dead by mystery gunmen.
Yingluck said she was worried about violence, but would only declare a state of emergency as a last resort.
"The use of the emergency decree is the very last option we will consider," she said. "The government does not want to resort to violence... we will have to use the expertise of our soldiers and police to look after the current situation."
Additional reporting by Pracha Hariraksapitak; Editing by Clarence Fernandez