I don't think the people in the middle should really be balanced to the other two. They don't have the resources or the manpower to keep up with the other factions. Instead, the strength of the people who walk away should come from their location and their ability to innovate and try new things.
The way I see it, the neutral side isn't actively at war with the other two factions, but if the leaders issued a statement to the effect of "If you march out to fight, our troops will hit you in the back" then they become a deterrent by virtue of their very existence. Magic and tech can't war seriously with one another because of the risk the neutral will roll in behind them and trap them in a pincer. Likewise, an attack on the neutral city by either side would leave the attacking faction wide open to their enemy.
So neutral doesn't have to be
as strong as the other two, just strong
enough that it isn't worth it to wipe them out.
Hey son, wanna' learn how ta' make witch balls?