By Karen Lema and Neil Jerome Morales

MANILA (Reuters) -Philippines President Ferdinand Marcos Jr on Monday touted his administration's successes over the past year, including battling inflation and steering the economy back on track, but said a number of economic challenges lie ahead.

After more than a year in office, buffeted by soaring inflation that has dented economic growth, the government is now "stabilising the prices of all critical commodities", Marcos said.

"Inflation rate is moving in the right direction," he said in his second state of the nation address.

"There are many things over which we have no control. But over those where we do have control, we are doing everything we can."

To help keep consumer prices in check, Marcos said the government aimed to increase local food production, and augment supply with "timely and calibrated importation".

Developing the long-neglected farm sector, which contributes 10% of the country's economic output, is a priority for Marcos, who also helms the agriculture ministry.

Sentiment towards Marcos soured in his first year in office after inflation surged to levels not seen in 14 years, prompting the Philippine central bank to embark on its most aggressive monetary tightening cycle in years.

The Philippines remains vulnerable to global price shocks because it buys a sizeable portion of its rice overseas, and relies on imports for most of its fuel requirements.

Michael Ricafort, an economist at Rizal Commercial Banking Corp, said sustaining the reduction in inflation and bringing down electricity prices, among the world's highest, would remain key challenges for the government.

Annual inflation eased for a fifth straight month in June to 5.4%, still outside the government's 2-4% target for the year.

A short distance away from the Congress building where Marcos spoke, hundreds of protesters pressed the government to deal with issues ranging from higher wages and inflation to the environment.

Marcos, the son of the strongman overthrown in a 1986 revolt, aims to expand the Philippine economy by as much as 8% to keep its place among Asia's fastest-growing countries, and halve the poverty rate, which was 18.1% in 2021, the most recent figure.

He repeated his promise to invest in the country's roads, ports, airports, and water supply, committing infrastructure spending that is equal to as much as 6% of GDP.

Marcos also addressed climate change, stressing the need to shift to renewables and low carbon energy, which he said would account for 35% of the country's energy mix by 2030 and 50% by 2040.

In the speech before the joint session of Congress, Marcos urged lawmakers to support his priority measures, which include seeking to tax single use plastics and reform the pension system of military and uniformed personnel.

Echoing a pledge he made when he assumed the presidency last year, Marcos said: "We will protect our sovereign rights and preserve our territorial integrity, in defence of rules-based international order."

Under Marcos, relations between China and the Philippines have grown tense, with Manila pivoting back to its traditional ally, the United States, which was granted greater access to military bases this year.

"Our journey to progress requires not only unity and social cohesion among our people. It is also imperative that our nation remains intact and inviolable, our sovereignty preserved," Marcos said in the speech that lasted for over an hour.

(Additional reporting by Enrico dela Cruz and Eloisa Lopez; Editing by Bernadette Baum and Mark Potter)