Thai Prime Minister Abhisit Vejjajiva warned yesterday the country's economy could slide into recession, as he finally delivered a maiden policy speech delayed by protesters who blockaded parliament for two days.

Underlining the challenge facing his two-week old government, and as exports shrank for the first time since 2002, Mr Abhisit was forced to make his speech at the Foreign Ministry.

Speaking live on television, Mr Abhisit said the country's three-year old political crisis could help trigger a recession if the government failed to implement a $8.6 billion stimulus package and restore confidence.

"These conflicts are the country's weakness, especially at a time when the world economy is entering its worst crisis in a century," he told legislators gathered at the ministry after talks failed to lift the siege at parliament.

As he spoke, hundreds of flag-waving, red-shirted supporters of former Prime Minister Thaksin Shinawatra, who was ousted in a 2006 coup and lives in exile, blocked the ministry's gates to demand that Mr Abhisit call fresh elections.

"This meeting was illegal," shouted a leader of the pro-Thaksin Democratic Alliance Against Dictatorship (DAAD), echoing the view of about 100 opposition parliamentarians who boycotted the special sitting.

After a brief shoving match with police, the marchers abandoned their siege, allowing Mr Abhisit and some 300 legislators to leave in a convoy under police escort.

Later outside parliament, DAAD leaders declared "victory" and told cheering supporters to go home for the New Year holidays.

"The fight of the red-shirted people will intensify in the new year," protest organiser Nattawut Saikuar told the crowd.

The venue for Mr Abhisit's speech was changed to avoid a repeat of the fighting around parliament in October between police and the yellow-shirted People's Alliance for Democracy (PAD), protesting against the pro-Thaksin government in power then.

Two people died and hundreds were injured in those clashes, the worst street violence in Bangkok since 1992.

This week's protests were largely peaceful, but the impasse between Bangkok's royalist and business elite, who accused Mr Thaksin of corruption, and rural voters who loved his populist policies, shows no sign of abating.

Mr Abhisit, an Oxford-educated economist, will lead a 19-member team of ministers and experts to tackle the economic crisis, a spokesman said after the government's first cabinet meeting.

The 44-year-old leader also pledged to work for national unity, but DAAD protesters accuse him of "stealing" power with the aid of the military and Bangkok elites, a charge he denies.

"The problem is these people think they own the country. They should call elections and let voters decide," said a Bangkok businessman at the rally outside parliament.

The pro-Thaksin administration elected in December 2007 was shaken by months of protests led by the PAD, which occupied Government House for three months and blockaded Bangkok's main airports in late November, crippling cargo shipments and tourism.

The PAD ended its campaign this month after a court dismissed the government led by Mr Thaksin's brother-in-law.

Now, with the pro-Thaksin red shirts waging a similar campaign against Mr Abhisit, analysts fear his shaky coalition could also be paralysed at a critical time for the economy.