By Ambika Ahuja
BANGKOK (Reuters) - Thai authorities will deploy armoured vehicles and shut roads surrounding thousands of defiant protesters on Thursday, forcing businesses to evacuate workers as tensions rise in the deadliest political crisis in two decades.
The army said its armoured vehicles will bolster checkpoints, stopping protesters from entering the area, and urged businesses on roads leading into the protesters' 3 sq-km (1.2 sq-mile) fortified encampment to close on Friday.
More than 20,000 of the mostly rural and urban poor protesters refused to leave as their leaders challenged the government from behind medieval-like walls made from tyres and wooden staves soaked in kerosene and topped by razor wire.
"We will send out groups to surround these vehicles to prevent them from advancing," Jatuporn Prompan, a protest leader, told supporters. "We believe the army will try to crack down this evening or tomorrow morning."
Companies across the area told employees to leave work early and activated back-up plans. Several stations in an elevated train system were shutting early. Public transportation was being diverted from the area.
Prime Minister Abhisit Vejjajiva is under enormous pressure to end the two-month crisis that has killed 29 people, wounded more than 1,000, paralysed parts of Bangkok and slowed growth in Southeast Asia's second-biggest economy.
The turmoil is shattering consumer confidence, a survey showed on Thursday, suggesting spending in shops and department stores is drying up as the crisis grinds on, a troubling sign for a sector that accounts for half the economy.
The University of the Thai Chamber of Commerce said its consumer confidence index fell by a record 2.6 points in April, the lowest since July 2009. Confidence has fallen for three straight months after rising steadily since the middle of 2009.
The Thai baht fell sharply immediately after the army's announcement, though witnesses saw no unusual activity around the sprawling red shirt encampment.
"Every bank is trying to get out of the baht now and we have not seen any central bank intervention to slow its fall," a Bangkok-based trader said. A second dealer said some of his clients closed business early on Thursday.
The red-shirted protesters, mostly supporters of former premier Thaksin Shinawatra who was ousted in a 2006 coup, ignored a midnight deadline to disperse after authorities delayed plans to cut power and water to the area following an outcry from residents.
IMMEDIATE CRACKDOWN UNLIKELY
The protesters say Abhisit lacks a popular mandate after coming to power in a controversial parliamentary vote 17 months ago with support from the military.
The prime minister on Wednesday cancelled a proposed November 14 election under his "national reconciliation" plan and called off talks with the protesters, raising speculation of a crackdown.
But he faced criticism for announcing he would cut supplies to the area and then reversing the threat hours later.
Both sides appear to be running out of options, raising the risk of a violent confrontation and flummoxing investors in one of Asia's most promising emerging markets.
An army source close to Army Chief Anupong Paochinda said an immediate crackdown is unlikely despite the threats.
"It's hard to say if or when the crackdown will be because we have to evaluate by the hour. We don't want casualties so we have to keep the pressure up so people are too tired to resist. But how and when, we have to evaluate constantly."
Foreign investors have turned negative since violence flared in April and have sold $584 million (395 million pounds) in Thai shares in the past six sessions, cutting their net buying so far this year to $607.6 million as of Wednesday.
"The markets have no idea what to make of the situation. It seems like we're heading back to square one," said Sukit Udomsirikul, a senior analyst at brokerage Siam City Securities.
Disparate views among protest leaders -- from radical former communists to academics and aspiring lawmakers -- make it difficult to reach consensus. Many face criminal charges for defying an emergency decree and some face terrorism charges carrying a maximum penalty of death.
Several harbour political ambitions and need to appease rank-and-file supporters. Others fear ending the protest now would be a one-way ticket to jail. Some hardliners advocate stepping up the protests to win the fight once and for all.
The red-shirted protesters, have said they would only disperse if a deputy prime minister faces criminal charges over a deadly April clash between troops and protesters.
(Additional reporting by Ploy Ten Kate and Panarat Thepgumpanat; writing by Jason Szep; editing by Bill Tarrant)
