Can a reviewer suggest references?
I'd say it is a common practice, and I have both been given reference suggestions in blind reviews and given reference suggestions in my own reviews. If you are concerned about a reviewer trying to promote his/her own papers by the suggestions, I'll just say that if the recommendations are apt (i.e., if you read the suggested papers and they do appear to be legitimate references), then it makes sense to cite the papers regardless of whether there is a seemingly disingenuous motive by the reviewer. Even if you don't specifically use the prior work, it makes sense to mention them in your "Related Work" section. If you don't cite the suggested papers, provide a legitimate reason in your rebuttal.

Indeed, if a reviewer is chosen well, he or she should be an expert in the topic of the paper, and most likely does have apt references under his or her name.