Could It Be Making Alcohol?
Possibly—but you can’t determine that from the photograph alone.
If yeast ferments the sugars in fruit juice, alcohol can be produced as a byproduct along with carbon dioxide. That’s why similar balloon-on-bottle arrangements are sometimes used in homemade alcoholic fermentation.
But the presence of a balloon doesn’t prove that alcohol is being made.
A very similar setup can be used simply to demonstrate fermentation and gas production.