As you might suspect, you can just turn it inside out and draw a curve from the body panel on the side seam up to the arm seam near the elbow, deepening the curve to effectively reduce the size of the underarm gusset, then just stitch the line, cut the excess fabric, and finish the seam (zig-zag is easiest). That will allow you to fit the tunic to you a little better.
Remember, before you stitch and cut, though, to pin it up and try it back on (still inside out, so the pins don't get ya), to make sure it fits you just right.
Then, put a belt on and blouse it over the belt a bit. Should look great!
If you want some more length on the bottom edge, don't be afraid to just grab an ~8" wide strip of some other fabric (the same as your neckhole facing is a great choice), hem one long edge, and seam it to the bottom edge of the tunic:
I felt like this tunic was too short and did that very thing; came out nicely, if I do say so myself.