HANOI (Reuters) - Hundreds of thousands of factory workers have gone on strike for higher wages but many Vietnamese are taking spiraling inflation and a declining value of their currency on the chin.
Others are calling on survival instincts honed by families through decades of war and a Soviet-style command economy up to the early 1990s by looking after their own patch, hoarding rice and petrol, gold and dollars.
In the one-party ruled Southeast Asian country where dissent is muted and street demonstrations extremely rare, others still take quiet satisfaction from watching the Communist Party leadership grapple with serious macro-economic problems.
"It is a crisis and as one Vietnamese friend of mine told me, 'sometimes very bad is very good'," said one Western diplomat.
Overall, foreign donors and governments are optimistic about the long-term potential of economic reforms, despite complaints from the United States and the European Union about corruption, lack of freedom of speech and jailing of political activists.
The ruling party faces one of its biggest challenges with yearly inflation in double-digits for seven consecutive months, hitting 25.2 percent in May.
Imports have soared causing a tripling of the trade deficit, a liquidity crunch has put pressure on the underdeveloped banking system and the fledgling stock market is down 60 percent, the world's worst performer.
"A dark cloud over the stock market has created a gloomy mood in my company" said a 25-year-old securities broker who requested anonymity for professional reasons.
The official interbank exchange rate of the dong has dropped nearly 5 percent since late March against the dollar. In the highly polarized economy, rising prices are stinging Vietnam's 85 million people, most of whom live in rural areas.
Tens of millions live in poverty or just above the poverty line as annual per capita income averages only $835 even as it has been hyped by pundits as the next "Asian Tiger" economy.
"Poor people and the elderly in the countryside are hurting a lot, our government does not provide a proper social security system for times like these," said Nguyen Van Hoang, a minibus driver whose family lives in the countryside.
Although media is state-controlled and puts a positive spin on most issues, they have reported workers staging 300 strikes nationwide in the first quarter for higher wages -- food costs 42 percent more than a year ago and fuel 30 percent more.
Most strikes have been at foreign-owned textile and garment factories, most of them peaceful, but a few turned nasty with punch-ups between workers and police or management personnel.
A worker's average monthly salary of $60 is not enough to cope with soaring inflation, but that is a common complaint even among those who earn higher salaries in the capital, Hanoi, and Ho Chi Minh City, the largest city with 8 million people.
"My small income increase does not match the rise in prices. Almost everything has been going up: fuel, food, clothes, etc," said office worker Nguyen Hien Luong.
"I'm trying to save money. I even think of riding a bicycle to go to work."
City dwellers say they are shopping less at supermarkets and more at cheaper street markets, eating out at restaurants less and buying fewer luxury goods.
They grumble about having to pay in dollars or if they want to use dong, shops that sell imported goods charge black market rates around 18,000 dong per dollar, about nine percent more than the official rate.
The government has prided itself on reducing poverty since the mid-1990s with reforms that shed the planned economy and many subsidies, building credibility with annual growth rates averaging 7.5 percent since 2000.
In the economic downturn, anxieties have crept in about the government's level of policy experience in coping with external shocks from the global economy.
Rumors and speculation drive a lot of economic decisions in Vietnam, where common complaints by domestic and foreign investors are of endemic corruption and lack of transparency.
Political challenges to the ruling party are not tolerated and the government takes an authoritarian posture on many problems.
It has warned speculators, hoarders and striking workers of "severe punishment" for breaking laws as it clings to the political stability that has attracted many investors.
Prime Minister Nguyen Tan Dung is in the hot seat as head of the government. He appears frequently in public and media talking about inflation, meets foreign financial institutions to discuss policy and travels widely.
"The Government understands what people are going through," Dung told the one-party National Assembly at the end of May.
He also admitted government shortcomings, but economic and political analysts say that apart from the labor disruptions, they have yet to observe dramatic social and political pressures.
"In Vietnam's political context, if you stick your head above the parapet, the costs are potentially high of what the security authorities could do," said Martin Gainsborough, Vietnam specialist at the University of Bristol, England. "However, we as observers should be ever more open to the possibility that unexpected events can happen."
Editing by Sanjeev Miglani