BANGKOK (Reuters) - Protesters laying siege to Bangkok's two airports braced for a battle with security forces on Friday after Thailand's prime minister declared a state of emergency to end a blockade threatening to cripple the economy.

People's Alliance of Democracy (PAD) "security guards," armed with sticks and metal bars, manned makeshift fortified roadblocks on the expressway leading to the capital's $4 billion Suvarnabhumi airport, shut since Tuesday.

There were similar scenes at the city's Don Muang airport, whose closure late on Wednesday severed all air links between the city of 8 million and the outside world.

"I need to do something to restore peace and order," he said.

A similar declaration in September to dislodge protesters occupying Government House was ignored by the army and, even though the PAD was preparing to repel a police assault, it was not clear when, or even if, one would materialize.

"We're not scared of the police because we love our country and we love our king," said Toy, a 53-year-old protester at the airport. "We are not afraid to die."

The sit-ins have forced hundreds of flights to be canceled, stranding thousands of foreign tourists in one of Asia's biggest air hubs and grounding millions of dollars of air cargo.

"We will not leave. We will use human shields against the police if they try to disperse us," PAD leader Suriyasai Katasila told Reuters.

PAD guards had set up a series of roadblocks on the main expressway to the airport and were stopping all cars and checking passengers and trunk compartments.

The roadblocks were manned by youths in black jackets, faces partly covered by masks. Some wore body armor and wielded wooden stakes and golf clubs.

Police and PAD said loud bangs were heard overnight near the broadcasting unit of the alliance's ASTV channel, on the bank of the Chao Praya River near the backpacker haunt of Khao San Road.

Police determined the sound came from M-79 grenades apparently launched from a passing boat, and subsequent gunfire was from a PAD guard firing in return.

A government spokesman said the economy could lose at least 100 billion baht ($2.8 billion) if the sieges drag on for a month, and GDP growth for the year could be cut to 4 percent from a current estimate of 4.5 percent, already a seven-year low.

The University of the Thai Chamber of Commerce survey forecast revenue losses of between 76 billion baht and 120 billion baht ($2.2 billion - $3.4 billion) in the sector if the chaos continues for another month.

FINAL BATTLE

Thailand's three-year-old political crisis has deepened dramatically since the PAD began a "final battle" on Monday to unseat a government it accuses of being a pawn of former leader Thaksin Shinawatra, ousted in a 2006 coup. Somchai is Thaksin's brother-in-law.

Pressure has built on the army to step in since Somchai rejected military calls to quit, but pro-government forces are threatening to take up arms if the elected administration is ousted, raising fears of major civil unrest.

Army chief Anupong has repeatedly said he would not take over, arguing the military is powerless to heal the fundamental political rifts between the Bangkok elite and middle classes who despise Thaksin, and the poor rural and urban majority who love him.

But rumors of the army preparing to launch what would be Thailand's 19th coup or attempted coup in 76 years of on-off democracy continue to swirl around the capital.

The government offered to shuttle thousands of stranded tourists by bus to U-Tapao, a Vietnam War-era naval airbase 150 km (90 miles) east of Bangkok, as an alternative landing site for airlines.

Aviation Department chief Chaisak Angkasuwan said 20 regional airbases in Thailand were available as an alternative.

Malaysia said it was laying on a military flight to evacuate some of it stranded nationals, Bernama news agency said.