Well, considering that both are beings of fire, the outcome is rather hard to determine. All in all, it's an extremely tight match.
Balrog:
Sword
Whip
Magic(see Gandalf discussing the door in Balin's Tomb)
Creates Shadow
Maia
Dragon:
Teeth/Claws
Tough, Scaly Armour
Spellcasting Eyes
Emits Light
Fell Spirit.
All those attributes pretty much offset the opponents. There are only two aspects that give distinct advantages to one side: the Dragon's ability to fly and Dragon's weak stomach. Regardless of whether or not a Balrog has wings, it's generally assumed that it can't fly. So the Dragon, which definitely can, has the upperhand. On the other side, the Dragon's belly is soft and vulnerable, making it very susceptible to an underside attack.
So the real question is whether or not the Dragon's ability to fly overrides it's extremely weak tummy.
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