Calls for Thaksin to step down, which have so far culminated in peaceful protests by thousands on the streets, are raising concerns that the uncertainty could cloud Thailand’s investment picture for longer than expected.

"There are some political issues in some countries such as Thailand that cast a negative shadow in the short term," David Marshall, managing director of Asia financial institutions at Fitch Ratings, told Reuters.

"But we haven’t yet revised down our expectations for the economy or for the banks," he said.

"I think we probably won’t do that if the political problems can be resolved within a matter of weeks, but if they persist for a month, it will have a negative impact on the economy and then we may have to take another look."

Investors must now contend with a highly volatile political situation just as the country comes off its slowest rate of economic growth in four years.

Investors are fretting the furore — fuelled by the sale of the telecoms firm Thaksin founded — could strangle economic reforms, driving foreigners to become net sellers of 5 billion baht (8 million) of shares over the past week.

While short-term capital flows could easily return, Thaksin’s tottering power base could end up marring more long-standing investment decisions such as foreign direct investment.

"If you are a sensible investor you want to know that the underlying conditions determining that investment will not change," said Sriyan Pietersz, head of research at JPMorgan in Thailand.

Finance Minister Thanong Bidaya said the political impasse could take months, if not a year, to resolve.

"It’s not good if the situation is prolonged, which should not be more than six months or one year," he told reporters.

The .8 billion takeover of Shin Corp, which also holds assets such as satellites, by Singapore’s Temasek Holdings was initiated by Thaksin’s relatives who did not have to pay tax, angering taxpayers and fanning national security concerns.

In a bid to stave off a growing campaign to oust him, Thaksin said on Wednesday he might consider stepping aside temporarily to defuse the crisis, lifting the baht from two-week lows, but also suggested he was not yet ready to do so.

"If he says he’s going to step down, the markets would receive it quite well, but that would be short term," said Amarit Sukhavanij, deputy managing director at Kasikorn Securities.

An interim caretaker government without Thaksin at the helm would still face difficulties making key decisions, a state of affairs that would not please investors.