The Baggies face City today in a crucial game for both teams.
Di Matteo told Absolute Radio: "Well they certainly have a squad that will be challenging for the title.
"Now whether they're going to be able to do it this year, to win it or not, I don't know, but certainly in the future they'll be up there challenging."
Listen to Man City v West Brom this Saturday 5th February Absolute Radio extra - on DAB Digital Radio, 1215AM and online in the UK from 1.30pm as programming kicks off with Russ Williams for pre-match build up, followed by full live commentary from Jim Proudfoot at 3pm, while Arsenal legend and Ian Wright takes care of post match analysis at 5pm featuring player and manager interviews, fan phone ins and a healthy supply of banter.
For more go to absoluteradio.co.uk/football.