The Pannonian Basin in southeastern Europe is heavily used for rain-fed agriculture. The region experienced several droughts in the last years, causing major yield losses. Ongoing climate change, characterised by increasing temperatures and potential evapotranspiration, and by changes in precipitation distribution will likely increase the frequency and intensity of drought episodes in the future. Hence, ongoing monitoring of droughts and estimation of their impact on agriculture is necessary to adapt agricultural practices to changing weather and climate extremes. Several regional initiatives, projects and online tools have been established to facilitate drought monitoring and management in the Pannonian Basin. However, reliable systems to forecast potential drought impacts on plant productivity and agricultural yields at monthly to seasonal scales are only in their infancy, as plant response to climatic extremes is still poorly understood. With the increasing availability of high-resolution and long-term Earth Observation (EO) data and recent progress in machine learning and artificial intelligence, further improvements in drought monitoring and impact prediction capacities are expected. Here we review the current state of drought monitoring in the Pannonian Basin, identify EO-based variables to potentially improve regional drought impact monitoring and outline future perspectives for seasonal forecasts of drought impacts on agriculture.