UPDATE 3-Protesters defiant in siege of key Bangkok district
* Protesters could face year in jail if they remain
* Prime minister says won't use force to disperse them
* Protests stoke concern about ripple effect on economy (Recasts, adds size of protest, quotes, details throughout)
By Jason Szep and Vithoon Amorn
BANGKOK, April 4 (Reuters) - More than 50,000 protesters defied orders to leave the Thai capital's main shopping district on Sunday despite threats of mass arrests, raising the stakes in the fourth week of street rallies against the government.
Despite repeated warnings they could face up to a year in jail, the red-shirted protesters looked set to remain encamped at a major intersection lined by upmarket department stores and five-star hotels in the heart of Bangkok for a second night.
Prime Minister Abhisit Vejjajiva called the rally "unlawful". But there was no sign that security forces would disperse the mostly rural and working-class "red shirts", who say they will not leave until parliament is dissolved and elections are called.
Abhisit would not dare to force the crowd to disperse, Jatuporn Prompan, a "red shirt" leader, said from a makeshift stage. "If bullets are fired, it will be a disaster for him."
The "red shirts", supporters of ousted premier Thaksin Shinawatra, hinted they may expand their rally to another area of the city on Monday. The protesters already occupy two areas: the shopping district and Phan Fah Bridge in Bangkok's old quarter.
"Tomorrow we will move out to step up our pressure on the government," Nattawut Saikua, another protest leader, told reporters. "We will retain our current two protest stages. Whether we set up another will be dictated by the situation."
Deputy Prime Minister Suthep Thaugsuban said the government would seek a court order on Monday to end their rally, which he says violates a tough Internal Security Act imposed last month.
Backed by Thailand's powerful military and royalist establishment, Abhisit said a peaceful poll now would be difficult due to the tensions and repeated his recent offer to dissolve parliament in December, a year early.
Analysts say Abhisit would probably lose an election if it were held now, raising investment risks in southeast Asia's second-biggest economy following a $1.6 billion surge in foreign buying of Thai stocks .SETI over the past five weeks on expectations that he would survive the showdown.
Economists also say that continued political turmoil could force the central bank to delay an expected interest-rate rise. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ * For a look at protesters' demands, click on [ID:nSGE6300EQ] * For a Q&A on the economic impact [ID:nSGE62L07K] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Raising fears of a blow to retail business, Central World, the second-largest shopping complex in southeast Asia, and half a dozen other big malls remained shuttered for a second day.
Central World usually attracts 150,000 people a day, said Sakon Thavisin, a spokesman for its parent company, Central Pattana Pcl CPN.BK.
"The hardest hit are restaurants and food shops with stranded fresh food and persishable raw materials because the blockade is preventing vehicles from going in to pick them up," he said.
The British-born, Oxford-educated Abhisit urged Bangkok's 15 million people to show restraint amid signs of frustration, underscored by a counter-rally on Friday by "pink shirt" protesters who say the "red shirts" are unreasonable.
The "red shirts" say Abhisit has no popular mandate and came to power illegitimately, heading a coalition the military cobbled together after courts dissolved a pro-Thaksin party that led the previous government. Abhisit says he was voted into office by the same parliament that picked his Thaksin-allied predecessors.
Laying siege to buildings or strategic areas is increasingly common in Thailand's colour-coded political conflict.
In 2008, yellow-shirted protesters who opposed Thaksin's allies in the previous government occupied the prime minister's office for three months and then blockaded Bangkok's main airport until a court expelled the government.
At the centre of the impasse is Thaksin, a former telecoms tycoon seen as authoritarian and corrupt before he was ousted in a 2006 coup. However, he is also a rallying symbol for the poor as the first Thai civilian leader to embrace rural voters in his 2001 election win. (Additional reporting by Ambika Ahuja and Pisit Changplayngam)
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