City have only picked up nine points from their last six games, winning just two of those matches, against Stoke City and Newcastle United.
Liverpool, meanwhile, are unbeaten in the league since December 14th when they lost to Manchester United, and former Arsenal star Merson believes the Reds’ form gives them the edge going into the game.
“I am just going for Liverpool here. They have really picked up of late, while Brendan Rodgers has rested a couple of players for the trip to Besiktas in Philippe Coutinho and Jordan Henderson,” Merson said on Sky Sports.
“For me, this game on Sunday is bigger than the Besiktas match. Getting beaten by Barcelona on Tuesday will have really knocked the stuffing out of City.
“And I think that Liverpool are at home and are on a right roll at the moment, so I see them winning this game 2-1.”
Liverpool have a superior head-to-head record in the league against City, with 82 wins compared to their 44.
They have not suffered a home defeat in any competition since losing to Chelsea on 8 November, a run that stretches back 11 games.
However, the Citizens have dominated the fixture in recent times, winning two out of the last three games.
Earlier in the season, City beat Liverpool 3-1 at The Etihad, with two goals coming from Stevan Jovetic, and another from Sergio Aguero.
But their record at Anfield is very poor and they haven’t claimed all three points there since 2003, when Nicolas Anelka scored twice in a 2-1 victory.
City have no fresh injury concerns ahead of the trip and will welcome back Yaya Toure from suspension, while Liverpool will be boosted by the return of Mamadou Sakho, Jordan Henderson, Lazar Markovic and Philippe Coutinho.
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