Tens of thousands of protesters marched through central Bangkok Wednesday, demanding the resignation of the government. The demonstration threatened to set off a new round of political instability which may hamper the government’s three-year, $44 billion stimulus plan it unveiled last month.

About 100,000 peaceful demonstrators, wearing the red shirts of Thaksin loyalists gathered in the heart of the government district. Chanting slogans, they called for the resignation of Prime Minister Abhisit Vejjajiva,

who took office five months ago.

“Political uncertainties may hinder the budget disbursement and hurt the economy,” said Duangmanee Vongpradhip, an official of the Bank of Thailand Wednesday.

Some business leaders fear that the demonstrations could further poison the investment climate and reduce the government efforts to implement the stimulus plan unveiled last month.

“The situation now is beyond negotiation, our objective is to remove the government, why would we talk to them,” said Jatupom Prompan, one of the leaders of the protests.

Prime Minister Abhist said on television that the police and army would avoid confrontations with the protesters but the government would respond with force if necessary.

“There is a group of people wanting to create chaos, but the government will do everything to restrain them, if there is rioting, we have to do something, I can affirm there will be no violence starting from the government’s side,” he said.

The two sides have been competing to define the terms of the debate.

The dismal of Thai economy has been another cause of anger among protesters. The World Bank has revised its growth prospects this week, now expects a 2.7% decline in Thailand’s gross domestic production in 2009, the country’s first contraction in more than a decade.