I'm not really sure... but this is how I take it.
With the advent rise of Altdorf and Nuln (after Magnous the Pious set up the magic schools etc), more or less, Stirland has remained 'traditional' agrarian Empire, where as other city states moved on to be more urban. I don't think Stirland actually went into a decline per se... just that it never really moved fast enough to catch up to the other cities.
I only came to this conclusion because
1; obviously Stirland is based on Imperial Russia - which too didn't 'decline' against other European states, but rather, never really got off its feet.
2; I don't recall any specific event which actually 'led to' the decline of Stirland, if there was.
I'm not sure if Stirland was the source of some Emperors as well as being the Capital of the Empire one time or another (my fluff is so twisted - writing essays at the moment lol) ... but yeah... it was fairly important a state... but didn't become a run down back water state... I think it has always been one, but with relatively few development ACROSS its territories (like, sure the cities may be more urbanised, but doubt they would consolidate that development into rural areas).
Just my take on this.