The Taiwan Research Institute estimated that the island's growth of gross domestic product would be 2.34 percent next year, 0.3 percentage points lower than expected this year.
Taiwan's purchasing managers' index for the manufacturing sector dropped to 48.4 in November, the lowest in three years, it said.
Taiwan's private consumption in 2018 and 2019 is forecast to grow by 2.16 percent and 2.2 percent, while private investment is likely to grow by 3.12 percent and 3.75 percent, respectively.
The think tank also found that cross-Strait relations and enforcement of the local budget also weighed heavily on the island's economy, expecting that 2019 would be full of challenge for Taiwan's economy.
Noting that the island's inflation rate rose to 1.6 percent, Chou Ji, an expert from the Chung-hua Institution for Economic Research, said that administrative and legal obstacles holding back economic growth should be eliminated.