I prefer working with jupyter notebooks in VSCode rather than in Google Colab, due to better and more configurable code analysis and autocompletions.
But recently added colab feature with highlighting the code line which is currently executed is super cool, and helpful for the immediate understanding of where your execution is stucking.

I’m wondering, if I can achieve the same functionality in VSCode with some extension, or setting?

Just debug mode is not enough here, as it requires manual switching from line to line. Otherwise it stops lightlighting current line. Also, you have to restart cell execution to go to the debug mode, which is also less convenient than always having this line highlight, so that when the problem occurs, you immediately see it.