The Philippines has lowered the alert level at Taal Volcano, two weeks after it began spewing ash, steam and rocks, in a move that could allow many of the more than 376,000 villagers displaced by its activity to return home.

A popular tourist destination just south of Manila because of its picturesque setting in the middle of a lake, Taal erupted on January 12. It caused no known deaths but delivered an early crisis this year for one of the world's most disaster-prone nations.

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"Taal volcano's condition in the two weeks ... has generally declined into less frequent volcanic earthquake activity, decelerated ground deformation ... and weak steam and gas emissions at the main crater," the Philippine Institute of Volcanology and Seismology said.

The government's agency lowered the alert level from 4 to 3, which means there is a "decreased tendency toward a hazardous eruption." The highest, level-5, alert indicates a major, much more dangerous, eruption.

The agency also reduced to half the danger zone where residents have to be evacuated, from the 14-kilometre (8.7-mile) radius around the volcano. Taal last erupted 43 years ago.

"We have to be careful of Taal because of the danger it may still bring, so at the lower level, there should be heightened preparedness. People should brace for rapid evacuation," Renato Solidum, the head of the institute, said in a televised news conference.

Risk remains

Mayor Daniel Reyes of Agoncillo, a town along the western shores of Taal Lake overlooking the island where the volcano lies, said he was relieved but remained concerned. Residents of Agoncillo and nearby Lemery could still not return home because of the towns' proximity to the volcano.

"It's somehow a relief but we're still under a total lockdown," Reyes told The Associated Press, adding all the 44,000 villagers of his town will remain in evacuation centres.

The volcano dumped ash across villages, towns and holiday resorts, forcing people into evacuation centres [Aaron Favila/AP Photo]

More than 376,000 people fled to safety from ash-blanketed towns and cities in hard-hit Batangas province. Nearly half of them sought accommodation in some 500 state-run emergency shelters, mostly school and government buildings. The eruption also shut Manila's main international airport for a night due to volcanic ash, forcing the cancellation of hundreds of flights.

A thriving tourism industry in Batangas and in upland Tagaytay city, where hundreds of hotels, venues, spas and parks have benefitted from its vantage view of one of the world's smallest volcanoes, came to a halt for days.

Resort towns around Taal Lake resembled ash-covered ghost towns. Police set up barricades and checkpoints to prevent residents from trying to return to the danger zone to check their homes, rescue pets or retrieve food, documents and belongings, sparking arguments.

The 311-metre (1,020 feet) Taal is the second-most restive of about two dozen active Philippine volcanoes and is close to densely populated areas.

On the small island where the volcano lies, more than 5,000 villagers, many of them working as tourist guides, fled as the ground shook and the volcano belched a tall plume of dark-grey ash and steam into the sky. Hundreds of horses, cows and other animals were left behind.

The Philippine archipelago lies in the so-called Pacific "Ring of Fire", a seismically fragile region around the ocean basin, where most of the world's earthquakes and volcanic eruptions occur.