Country Default Spreads and Risk Premiums

Last updated: January 2019

This table summarizes the latest bond ratings and appropriate default spreads for different countries. While you can use these numbers as rough estimates of country risk premiums, you may want to modify the premia to reflect the additonal risk of equity markets. To estimate the long term country equity risk premium, I start with a default spread, which I obtain in one of two ways:
(1) I use the local currency sovereign rating (from Moody's: www.moodys.com) and estimate the default spread for that rating (based upon traded country bonds) over a default free government bond rate. For countries without a Moody's rating but with an S&P rating, I use the Moody's equivalent of the S&P rating. To get the default spreads by sovereign rating, I use the CDS spreads and compute the average CDS spread by rating. Using that number as a basis, I extrapolate for those ratings for which I have no CDS spreads.
(2) I start with the CDS spread for the country, if one is available and subtract out the US CDS spread, since my mature market premium is derived from the US market. That difference becomes the country spread. For the few countries that have CDS spreads that are lower than the US, I will get a negative number.
You can add just this default spread to the mature market premium to arrive at the total equity risk premium. I add an additional step. In the short term especially, the equity country risk premium is likely to be greater than the country's default spread. You can estimate an adjusted country risk premium by multiplying the default spread by the relative equity market volatility for that market (Std dev in country equity market/Std dev in country bond). I have used the emerging market average of 1.23 (estimated by comparing a emerging market equity index to an emerging market government/public bond index) to estimate country risk premium.I have added this to my estimated risk premium of 5.96% for mature markets (obtained by looking at the implied premium for the S&P 500) to get the total risk premium.

Country GDP (in billions) Moody's rating Adj. Default Spread Equity Risk Premium Country Risk Premium Corporate Tax Rate
Abu Dhabi 415.00 Aa2 0.56% 6.65% 0.69% 55.00%
Albania 13.04 B1 5.08% 12.21% 6.25% 15.00%
Algeria 170.37 NA 6.21% 13.60% 7.64% 26.00%
Andorra (Principality of) 3.01 Baa2 2.15% 8.60% 2.64% 10.00%
Angola 124.21 B3 7.34% 14.99% 9.03% 30.00%
Argentina 637.59 B2 6.21% 13.60% 7.64% 30.00%
Armenia 11.54 B1 5.08% 12.21% 6.25% 20.00%
Aruba 3.00 Baa1 1.80% 8.18% 2.22% 25.00%
Australia 1323.42 Aaa 0.00% 5.96% 0.00% 30.00%
Austria 416.60 Aa1 0.45% 6.51% 0.55% 25.00%
Azerbaijan 40.75 Ba2 3.39% 10.13% 4.17% 20.00%
Bahamas 12.16 Baa3 2.48% 9.02% 3.06% 0.00%
Bahrain 35.31 B2 6.21% 13.60% 7.64% 0.00%
Bangladesh 249.72 Ba3 4.06% 10.96% 5.00% 25.00%
Barbados 4.80 Caa3 11.28% 19.83% 13.87% 30.00%
Belarus 54.44 B3 7.34% 14.99% 9.03% 18.00%
Belgium 492.68 Aa3 0.68% 6.80% 0.84% 29.00%
Belize 1.84 B3 7.34% 14.99% 9.03% 28.21%
Benin 9.27 B1 5.08% 12.21% 6.25% 30.00%
Bermuda 6.20 A2 0.96% 7.14% 1.18% 0.00%
Bolivia 37.51 Ba3 4.06% 10.96% 5.00% 25.00%
Bosnia and Herzegovina 18.17 B3 7.34% 14.99% 9.03% 10.00%
Botswana 17.41 A2 0.96% 7.14% 1.18% 22.00%
Brazil 2055.51 Ba2 3.39% 10.13% 4.17% 34.00%
Brunei 12.13 NA 0.79% 6.94% 0.98% 18.50%
Bulgaria 56.83 Baa2 2.15% 8.60% 2.64% 10.00%
Burkina Faso 12.87 B2 6.21% 13.60% 7.64% 28.00%
Cambodia 22.16 B2 6.21% 13.60% 7.64% 20.00%
Cameroon 34.80 B2 6.21% 13.60% 7.64% 33.00%
Canada 1653.04 Aaa 0.00% 5.96% 0.00% 26.50%
Cape Verde 3.20 B2 6.21% 13.60% 7.64% 28.00%
Cayman Islands 1.90 Aa3 0.68% 6.80% 0.84% 0.00%
Chile 277.08 A1 0.79% 6.94% 0.98% 26.00%
China 12237.70 A1 0.79% 6.94% 0.98% 25.00%
Colombia 309.19 Baa2 2.15% 8.60% 2.64% 33.00%
Congo (Democratic Republic of) 37.24 B3 7.34% 14.99% 9.03% 35.00%
Congo (Republic of) 8.72 Caa2 10.16% 18.46% 12.50% 28.00%
Cook Islands 1.20 B1 5.08% 12.21% 6.25% 0.00%
Costa Rica 57.06 B1 5.08% 12.21% 6.25% 30.00%
Côte d'Ivoire 40.39 Ba3 4.06% 10.96% 5.00% 25.00%
Croatia 54.85 Ba2 3.39% 10.13% 4.17% 18.00%
Cuba 81.60 Caa2 10.16% 18.46% 12.50% 24.00%
Curacao 1.00 A3 1.35% 7.63% 1.67% 22.00%
Cyprus 21.65 Ba2 3.39% 10.13% 4.17% 12.50%
Czech Republic 215.73 A1 0.79% 6.94% 0.98% 19.00%
Denmark 324.87 Aaa 0.00% 5.96% 0.00% 22.00%
Dominican Republic 75.93 Ba3 4.06% 10.96% 5.00% 27.00%
Ecuador 103.06 B3 7.34% 14.99% 9.03% 25.00%
Egypt 235.37 B3 7.34% 14.99% 9.03% 23.00%
El Salvador 24.81 Caa1 8.46% 16.37% 10.41% 30.00%
Estonia 25.92 A1 0.79% 6.94% 0.98% 20.00%
Ethiopia 80.56 B1 5.08% 12.21% 6.25% 30.00%
Fiji 5.06 Ba3 4.06% 10.96% 5.00% 20.00%
Finland 251.88 Aa1 0.45% 6.51% 0.55% 20.00%
France 2582.50 Aa2 0.56% 6.65% 0.69% 33.00%
Gabon 14.62 Caa1 8.46% 16.37% 10.41% 30.00%
Gambia 1.01 NA 7.34% 14.99% 9.03% 31.00%
Georgia 15.16 Ba2 3.39% 10.13% 4.17% 31.00%
Germany 3677.44 Aaa 0.00% 5.96% 0.00% 15.00%
Ghana 47.33 B3 7.34% 14.99% 9.03% 25.00%
Greece 200.29 B3 7.34% 14.99% 9.03% 29.00%
Guatemala 75.62 Ba1 2.82% 9.43% 3.47% 25.00%
Guernsey (States of) 0.50 Aa3 0.68% 6.80% 0.84% 0.00%
Guinea 10.50 NA 13.54% 22.61% 16.65% 29.15%
Guinea-Bissau 1.35 NA 8.46% 16.37% 10.41% 29.15%
Guyana 3.68 NA 5.08% 12.21% 6.25% 18.64%
Haiti 8.41 NA 10.16% 18.46% 12.50% 18.64%
Honduras 22.98 B1 5.08% 12.21% 6.25% 25.00%
Hong Kong 341.45 Aa2 0.56% 6.65% 0.69% 16.50%
Hungary 139.14 Baa3 2.48% 9.02% 3.06% 9.00%
Iceland 23.91 A3 1.35% 7.63% 1.67% 20.00%
India 2597.49 Baa2 2.15% 8.60% 2.64% 35.00%
Indonesia 1015.54 Baa2 2.15% 8.60% 2.64% 25.00%
Iran 439.51 NA 3.39% 10.13% 4.17% 20.23%
Iraq 197.72 Caa1 8.46% 16.37% 10.41% 15.00%
Ireland 333.73 A2 0.96% 7.14% 1.18% 12.50%
Isle of Man 7.40 Aa2 0.56% 6.65% 0.69% 0.00%
Israel 350.85 A1 0.79% 6.94% 0.98% 23.00%
Italy 1934.80 Baa3 2.48% 9.02% 3.06% 24.00%
Jamaica 14.77 B3 7.34% 14.99% 9.03% 25.00%
Japan 4872.14 A1 0.79% 6.94% 0.98% 30.86%
Jersey (States of) 1.00 Aa3 0.68% 6.80% 0.84% 20.00%
Jordan 40.07 B1 5.08% 12.21% 6.25% 20.00%
Kazakhstan 159.41 Baa3 2.48% 9.02% 3.06% 20.00%
Kenya 74.94 B2 6.21% 13.60% 7.64% 30.00%
Korea 1530.75 Aa2 0.56% 6.65% 0.69% 25.00%
Korea, D.P.R. NA NA 13.54% 22.61% 16.65% 23.10%
Kuwait 120.13 Aa2 0.56% 6.65% 0.69% 15.00%
Kyrgyzstan 7.56 B2 6.21% 13.60% 7.64% 10.00%
Latvia 30.26 A3 1.35% 7.63% 1.67% 20.00%
Lebanon 51.84 B3 7.34% 14.99% 9.03% 15.00%
Liberia 2.16 NA 13.54% 22.61% 16.65% 29.15%
Libya 50.98 NA 5.08% 12.21% 6.25% 20.00%
Liechtenstein 6.70 Aaa 0.00% 5.96% 0.00% 12.50%
Lithuania 47.17 A3 1.35% 7.63% 1.67% 15.00%
Luxembourg 62.40 Aaa 0.00% 5.96% 0.00% 26.01%
Macao 62.40 Aa3 0.68% 6.80% 0.84% 12.00%
Macedonia 50.36 Ba3 4.06% 10.96% 5.00% 10.00%
Madagascar 11.50 NA 7.34% 14.99% 9.03% 20.00%
Malawi 6.30 NA 8.46% 16.37% 10.41% 30.00%
Malaysia 314.50 A3 1.35% 7.63% 1.67% 24.00%
Maldives 4.60 B2 6.21% 13.60% 7.64% 0.00%
Mali 15.29 NA 8.46% 16.37% 10.41% 29.15%
Malta 12.54 A3 1.35% 7.63% 1.67% 35.00%
Mauritius 13.34 Baa1 1.80% 8.18% 2.22% 15.00%
Mexico 1149.92 A3 1.35% 7.63% 1.67% 30.00%
Moldova 8.13 B3 7.34% 14.99% 9.03% 12.00%
Mongolia 11.49 B3 7.34% 14.99% 9.03% 33.00%
Montenegro 4.77 B1 5.08% 12.21% 6.25% 9.00%
Montserrat 1.50 Baa3 2.48% 9.02% 3.06% 27.98%
Morocco 109.14 Ba1 2.82% 9.43% 3.47% 31.00%
Mozambique 12.33 Caa3 11.28% 19.83% 13.87% 32.00%
Myanmar 69.32 NA 8.46% 16.37% 10.41% 25.00%
Namibia 13.24 Ba1 2.82% 9.43% 3.47% 32.00%
Netherlands 826.20 Aaa 0.00% 5.96% 0.00% 25.00%
New Zealand 205.85 Aaa 0.00% 5.96% 0.00% 28.00%
Nicaragua 13.81 B2 6.21% 13.60% 7.64% 30.00%
Niger 8.12 NA 13.54% 22.61% 16.65% 28.21%
Nigeria 375.77 B2 6.21% 13.60% 7.64% 30.00%
Norway 398.83 Aaa 0.00% 5.96% 0.00% 23.00%
Oman 72.64 Baa3 2.48% 9.02% 3.06% 15.00%
Pakistan 304.95 B3 7.34% 14.99% 9.03% 30.00%
Panama 61.84 Baa2 2.15% 8.60% 2.64% 25.00%
Papua New Guinea 21.09 B2 6.21% 13.60% 7.64% 30.00%
Paraguay 29.73 Ba1 2.82% 9.43% 3.47% 10.00%
Peru 211.39 A3 1.35% 7.63% 1.67% 29.50%
Philippines 313.60 Baa2 2.15% 8.60% 2.64% 30.00%
Poland 524.51 A2 0.96% 7.14% 1.18% 19.00%
Portugal 217.57 Baa3 2.48% 9.02% 3.06% 21.00%
Qatar 167.61 Aa3 0.68% 6.80% 0.84% 10.00%
Ras Al Khaimah (Emirate of) 5.20 A2 0.96% 7.14% 1.18% 0.00%
Romania 211.80 Baa3 2.48% 9.02% 3.06% 16.00%
Russia 1577.52 Ba1 2.82% 9.43% 3.47% 20.00%
Rwanda 9.14 B2 6.21% 13.60% 7.64% 30.00%
Saudi Arabia 683.83 A1 0.79% 6.94% 0.98% 20.00%
Senegal 16.37 Ba3 4.06% 10.96% 5.00% 30.00%
Serbia 41.43 Ba3 4.06% 10.96% 5.00% 15.00%
Sharjah 5.00 A3 1.35% 7.63% 1.67% 20.00%
Sierra Leone 3.77 NA 13.54% 22.61% 16.65% 30.00%
Singapore 323.91 Aaa 0.00% 5.96% 0.00% 17.00%
Slovakia 95.77 A2 0.96% 7.14% 1.18% 21.00%
Slovenia 48.77 Baa1 1.80% 8.18% 2.22% 19.00%
Solomon Islands 1.30 B3 7.34% 14.99% 9.03% 30.00%
Somalia 7.37 NA 13.54% 22.61% 16.65% 29.15%
South Africa 349.42 Baa3 2.48% 9.02% 3.06% 28.00%
Spain 1311.32 Baa1 1.80% 8.18% 2.22% 25.00%
Sri Lanka 87.17 B1 5.08% 12.21% 6.25% 28.00%
St. Maarten 1.50 Baa2 2.15% 8.60% 2.64% 35.00%
St. Vincent & the Grenadines 0.77 B3 7.34% 14.99% 9.03% 20.00%
Sudan 117.49 NA 18.00% 28.10% 22.14% 35.00%
Suriname 3.32 B2 6.21% 13.60% 7.64% 36.00%
Swaziland 3.72 B2 6.21% 13.60% 7.64% 28.00%
Sweden 538.04 Aaa 0.00% 5.96% 0.00% 22.00%
Switzerland 678.89 Aaa 0.00% 5.96% 0.00% 18.00%
Syria NA NA 13.54% 22.61% 16.65% 28.00%
Taiwan 970.90 Aa3 0.68% 6.80% 0.84% 20.00%
Tajikistan 7.15 B3 2.82% 9.43% 3.47% 20.00%
Tanzania 52.09 B1 5.08% 12.21% 6.25% 30.00%
Thailand 455.22 Baa1 1.80% 8.18% 2.22% 20.00%
Togo 4.81 NA 8.46% 16.37% 10.41% 29.15%
Trinidad and Tobago 22.10 Ba1 2.82% 9.43% 3.47% 25.00%
Tunisia 40.26 B2 6.21% 13.60% 7.64% 25.00%
Turkey 851.10 Ba3 4.06% 10.96% 5.00% 22.00%
Turks and Caicos Islands 1.50 Baa1 1.80% 8.18% 2.22% 0.00%
Uganda 25.89 B2 6.21% 13.60% 7.64% 30.00%
Ukraine 112.15 Caa2 8.46% 16.37% 10.41% 18.00%
United Arab Emirates 382.58 Aa2 0.56% 6.65% 0.69% 55.00%
United Kingdom 2622.43 Aa2 0.56% 6.65% 0.69% 19.00%
United States 19390.60 Aaa 0.00% 5.96% 0.00% 25.00%
Uruguay 56.16 Baa2 2.15% 8.60% 2.64% 25.00%
Venezuela 250.00 C 18.00% 28.10% 22.14% 34.00%
Vietnam 223.86 Ba3 4.06% 10.96% 5.00% 20.00%
Yemen, Republic NA NA 18.00% 28.10% 22.14% 20.00%
Zambia 25.81 Caa1 8.46% 16.37% 10.41% 35.00%
Zimbabwe 17.85 NA 10.16% 18.46% 12.50% 25.00%

For more details, download the excel spreadsheet that contains this data on my website: http://www.stern.nyu.edu/~adamodar/pc/datasets/ctryprem.xls
If you are interested in my approach to computing the equity risk premium, download my magnum opus (just kidding):
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2742186

And my paper on measuring country risk
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2812261

Last updated: January 2019

Aswath Damodaran