Depends on how much air is in there with the water.

Water itself is incompressible so the balloon won’t shrink that much, but there’s some air in there so it would shrink a bit.

The balloon’s popping action comes from being filled and expanded. It’s an elastic, so if something breaks it, it snaps back.

The only way that wouldn’t happen is if there was mostly air in there, and you went to the appropriate depth where that air was compressed down to its original volume.