Thai troops struggle to contain Bangkok protests

BANGKOK (Reuters) - Thai authorities said on Thursday they would intensify efforts to contain anti-government protests in Bangkok, after a soldier was killed in the latest clash of a seven-week old campaign to force early elections.

The "red shirt" supporters of ousted former premier Thaksin Shinawatra remained defiant in their makeshift encampment in the capital after skirmishes with Thai troops on Wednesday in Bangkok's northern suburbs left 19 wounded.

The increasingly violent protests and the economic toll they are taking on Southeast Asia's second-largest economy is piling more pressure on Prime Minister Abhisit Vejjajiva to break up the red shirt camp in a ritzy shopping district of the capital.

Army spokesman Sansern Kaewkamnerd told Reuters troops at checkpoints on roads leading into the area would stop people bringing in weapons and might discourage more from going in.

But red shirt leader Weng Tojirakarn said on Thursday he expects more people to join his ranks after Wednesday's clash. "It was clear from yesterday that the government is bringing war upon us," he said on the protest stage. "I believe more people will come after what happened and we will keep fighting. We believe victory is near," he said to loud cheers from thousands in their encampment behind medieval-like barricades made of truck tyres, bamboo poles and chunks of concrete.

With neither side showing any sign of compromise, analysts expect the stalemate to go on with potential flashpoints ahead.

"The situation is very volatile and any slight provocation by either side could again spiral into violence," said Somjai Phagaphasvivat, a professor at Thammasat University.

"The army appears reluctant to move in immediately on the main encampment, choosing instead to contain the unrest from spreading elsewhere. The army appears to be applying pressure a little at a time, and at the end, there may still be room for a political compromise. But we will have to see who caves first."

Deputy Prime Minister Suthep Thaugsuban acknowledged to reporters on Thursday it would be hard to forcibly eject the red shirts because many women and children are among them.

UNREST HURTING ECONOMY

Thailand's central bank said on Thursday the unrest had shaved 0.9 percent off its latest 2010 economic growth forecast.

The Bank is now projecting GDP growth at 4.3-5.8 percent from 3.3-5.3 percent in January. The forecast would have been nearly a percentage point higher, but for the fact the protests have begun to hurt consumption, tourism and investment, the Bank said.

The stock market was up slightly at 0800 GMT, compared with slight falls in neighbouring markets. But Kim Eng Securities, Thailand's top brokerage, warned that investors may be underestimating the economic impact of the turbulence.

"With 60 percent of GDP growth hinging on consumption, there is downside risk," it said.

The violence has had a devastating effect on Thailand's tourist industry, which accounts for 6 percent of the economy and 15 percent of the workforce. Arrivals at Bangkok's Suvarnabhumi Airport have fallen by a third since violence broke out.

Consumer sentiment has been declining as the unrest drags on into a second month, and economist say the political uncertainty may discourage new investment.

Wednesday's violence flared after 2,000 red shirts moved out of the central shopping area to meet supporters in a northern suburb. Fighting erupted on a crowded highway 40 km (25 miles) north of central Bangkok when security forces barred their way. Troops fired rubber bullets and live rounds, first in the air and then into the charging protesters, Reuters witnesses said.

Red shirts hurled stones, shot metal balls from sling-shots and launched fireworks at soldiers and police. Witnesses said the dead soldier was shot through the helmet, apparently caught in friendly fire. Another soldier was among 19 wounded.

Police said protesters left behind 62 rocket-propelled M-79 grenades after Wednesday's clash. Grenades and other weapons have been used by the anti-government protesters in previous clashes.

In all, 27 people have died and nearly 1,000 have been wounded in the latest episode in a five-year political crisis.

Hopes of a deal to end the violence faded after British-born, Oxford-educated Abhisit rejected a red shirt proposal for an election in three months, saying he would not negotiate in the face of threats.

The red shirts oppose what they say is the unelected royalist elite that controls Thailand and broadly back Thaksin, who was ousted in a coup in 2006 but before that built up a following among the poor through rural development and welfare policies.

The former telecoms tycoon was convicted in absentia on corruption-related charges and lives abroad to avoid jail.

(Additional reporting by the Bangkok bureau; Writing by Bill Tarrant; editing by Raju Gopalakrishnan)