The 41-year-old, who also represented Bayern as a player, thinks the Gunners are no better than this time last season, when they were knocked out by the German champions at the same stage in the competition.
Babbel also insists Arsene Wenger's squad will struggle to cope with an extensive injury list - and that a "concentrated" Bayern side should have no problem progressing to the Champions League quarter-finals.
But perhaps Babbel's sharpest insult comes at the expense of Arsenal's reputation in important clashes, with the German claiming that they often lose to the big teams.
“They [Arsenal] are not better than last year and have many injuries,” the ex-Liverpool man told Munchner Merkur.
“If Bayern remain concentrated, Arsenal will not be a problem. You see it in the Premier League: against the big teams they often lose.”
The 41-year-old did reserve praise for Lukas Podolski, however, admitting that the forward is "on fire" whenever he takes to the pitch.
That is in stark contrast to Babbel's thoughts of the German during his time at Bayern Munich and Koln, when he accused Podolski of being "too lazy."
“[Podolski] surprises me,” Babbel added. “I haven't given him the credit he deserves for the success he's had in England.
“Honestly, I thought he was too lazy at Bayern Munich and Koln but he has emerged. When he is on the pitch, he is on fire."
Arsenal host Bayern Munich at the Emirates Stadium on Wednesday night, before travelling to the Allianz Arena on March 11 for the return leg.