In VirtualBox 5.1.4 r110228 with the same version of VirtualBox extensions installed in Ubuntu 16.04, enabling 3D Acceleration (Settings... > Display > Screen > Enable 3D Acceleration) fixed the launcher icon resize issue.
Virtual machine settings
Unfortunately, I also had to disable Hardware Acceleration in Google Chrome running in the VM otherwise Chrome just appeared as a black window.
Update 1
In addition to enabling 3D Acceleration, install VirtualBox Guest Additions from the Ubuntu repo instead of inserting the VirtualBox CD image:
apt install virtualbox-guest-dkms virtualbox-guest-utils virtualbox-guest-x11
VirtualBox Guest Additions from the Ubuntu repo fixed rendering issues with Chrome and VS Code.
gsettings set org.compiz.unityshell:/org/compiz/profiles/unity/plugins/unityshell/ icon-size 20– Sergiy Kolodyazhnyy Jul 20 '16 at 13:10