They relied on very strong unified defence and Hellsguard mercenaries who Garlemald has had long historical ties to. Hellsguard are naturally magically talented and so provided some measure of counter to the Garleans weakness. That, and the fact that the lands the Garleans held weren't particularly desirable, meant that most of their southern neighbours found it just not worth the cost in actually conquering them.
However yes, the Garleans have been a people who have struggled against stronger neighbours for a long time. It is somewhat ironic considering how their foreign policy developed but perhaps that is a result of their historic treatment.