Country Default Spreads and Risk Premiums

Last updated: January 2018

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 1.12 (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 5.08% 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 (added to mature market premIUM)
Abu Dhabi 390.00 Aa2 0.51% 5.65% 0.57%
Albania 11.86 B1 4.62% 10.27% 5.19%
Algeria 159.05 NA 6.67% 12.58% 7.50%
Andorra (Principality of) 2.86 Baa2 1.95% 7.27% 2.19%
Angola 102.60 B2 5.64% 11.42% 6.34%
Anguilla 1.50 NA 5.61% 11.39% 6.31%
Antigua & Barbuda 1.46 NA 5.61% 11.39% 6.31%
Argentina 545.48 B2 5.64% 11.42% 6.34%
Armenia 10.57 B1 4.62% 10.27% 5.19%
Aruba 2.60 Baa1 1.64% 6.92% 1.84%
Australia 1204.62 Aaa 0.00% 5.08% 0.00%
Austria 390.80 Aa1 0.41% 5.54% 0.46%
Azerbaijan 37.85 Ba2 3.08% 8.54% 3.46%
Bahamas 11.26 Baa3 2.26% 7.62% 2.54%
Bahrain 32.18 B1 4.62% 10.27% 5.19%
Bangladesh 221.42 Ba3 3.69% 9.23% 4.15%
Barbados 4.53 Caa3 10.25% 16.60% 11.52%
Belarus 47.41 Caa1 7.69% 13.72% 8.64%
Belgium 467.96 Aa3 0.62% 5.78% 0.70%
Belize 1.74 B3 6.67% 12.58% 7.50%
Benin 8.58 NA 4.86% 10.47% 5.46%
Bermuda 5.60 A2 0.87% 6.06% 0.98%
Bolivia 33.81 Ba3 3.69% 9.23% 4.15%
Bosnia and Herzegovina 16.91 B3 6.67% 12.58% 7.50%
Botswana 15.58 A2 0.87% 6.06% 0.98%
Brazil 1796.19 Ba2 3.08% 8.54% 3.46%
British Virgin Islands 0.20 NA 5.61% 11.39% 6.31%
Brunei 11.40 NA 0.87% 6.06% 0.98%
Bulgaria 53.24 Baa2 1.95% 7.27% 2.19%
Burkina Faso 11.69 B2 5.64% 11.42% 6.34%
Cambodia 20.02 B2 5.64% 11.42% 6.34%
Cameroon 32.22 B2 5.64% 11.42% 6.34%
Canada 1529.76 Aaa 0.00% 5.08% 0.00%
Cape Verde 1.90 B2 5.64% 11.42% 6.34%
Cayman Islands 3.20 Aa3 0.62% 5.78% 0.70%
Channel Islands NA NA 0.82% 6.01% 0.93%
Chile 247.03 Aa3 0.62% 5.78% 0.70%
China 11199.15 A1 0.72% 5.89% 0.81%
Colombia 282.46 Baa2 1.95% 7.27% 2.19%
Congo (Democratic Republic of) 31.93 B3 6.67% 12.58% 7.50%
Congo (Republic of) 7.83 Caa2 9.23% 15.46% 10.38%
Cook Islands 1.20 B1 4.62% 10.27% 5.19%
Costa Rica 57.44 Ba2 3.08% 8.54% 3.46%
Côte d'Ivoire 36.37 Ba3 3.69% 9.23% 4.15%
Croatia 50.71 Ba2 3.08% 8.54% 3.46%
Cuba 77.20 Caa2 9.23% 15.46% 10.38%
Curacao 1.00 A3 1.23% 6.46% 1.38%
Cyprus 20.05 Ba3 3.69% 9.23% 4.15%
Czech Republic 195.31 A1 0.72% 5.89% 0.81%
Denmark 306.90 Aaa 0.00% 5.08% 0.00%
Dominican Republic 71.58 Ba3 3.69% 9.23% 4.15%
Ecuador 98.61 B3 6.67% 12.58% 7.50%
Egypt 332.79 B3 6.67% 12.58% 7.50%
El Salvador 26.80 Caa1 7.69% 13.72% 8.64%
Estonia 23.34 A1 0.72% 5.89% 0.81%
Ethiopia 72.37 B1 4.62% 10.27% 5.19%
Falkland Islands 0.00 NA 3.16% 8.63% 3.55%
Fiji 4.70 Ba3 3.69% 9.23% 4.15%
Finland 238.50 Aa1 0.41% 5.54% 0.46%
France 2465.45 Aa2 0.51% 5.65% 0.57%
Gabon 14.21 B3 6.67% 12.58% 7.50%
Gambia 0.96 NA 9.23% 15.46% 10.38%
Georgia 14.38 Ba2 3.08% 8.54% 3.46%
Germany 3477.80 Aaa 0.00% 5.08% 0.00%
Ghana 42.69 B3 6.67% 12.58% 7.50%
Gibraltar 0 0.82% 6.01% 0.93% 25.51%
Greece 192.69 Caa2 9.23% 15.46% 10.38%
Greenland NA NA 0.82% 6.01% 0.93%
Guatemala 68.76 Ba1 2.56% 7.96% 2.88%
Guernsey (States of) 0.50 Aa3 0.62% 5.78% 0.70%
Guinea 8.20 NA 9.23% 15.46% 10.38%
Guinea-Bissau 1,.16 NA 6.67% 12.58% 7.50%
Guyana 3.50 NA 3.69% 9.23% 4.15%
Haiti 8.02 NA 7.69% 13.73% 8.65%
Honduras 21.52 B1 4.62% 10.27% 5.19%
Hong Kong 320.91 Aa2 0.51% 5.65% 0.57%
Hungary 125.82 Baa3 2.26% 7.62% 2.54%
Iceland 20.05 A3 1.23% 6.46% 1.38%
India 2263.79 Baa2 1.95% 7.27% 2.19%
Indonesia 932.26 Baa3 2.26% 7.62% 2.54%
Iran 418.98 NA 1.95% 7.27% 2.19%
Iraq 171.49 Caa1 7.69% 13.72% 8.64%
Ireland 304.82 A2 0.87% 6.06% 0.98%
Isle of Man 7.40 Aa2 0.51% 5.65% 0.57%
Israel 317.74 A1 0.72% 5.89% 0.81%
Italy 1858.91 Baa2 1.95% 7.27% 2.19%
Jamaica 14.06 B3 6.67% 12.58% 7.50%
Japan 4940.16 A1 0.72% 5.89% 0.81%
Jersey (States of) 1.00 Aa3 0.62% 5.78% 0.70%
Jordan 38.65 B1 4.62% 10.27% 5.19%
Kazakhstan 137.28 Baa3 2.26% 7.62% 2.54%
Kenya 70.53 B1 4.62% 10.27% 5.19%
Korea 1411.25 Aa2 0.51% 5.65% 0.57%
Korea, D.P.R. NA NA 10.25% 16.60% 11.52%
Kuwait 110.88 Aa2 0.51% 5.65% 0.57%
Kyrgyzstan 6.55 B2 5.64% 11.42% 6.34%
Laos 15.90 NA 1.06% 6.27% 1.19%
Latvia 27.57 A3 1.23% 6.46% 1.38%
Lebanon 49.60 B3 6.67% 12.58% 7.50%
Liberia 2.10 NA 12.30% 18.91% 13.83%
Libya NA NA 7.69% 13.73% 8.65%
Liechtenstein 6.70 Aaa 0.00% 5.08% 0.00%
Lithuania 42.74 A3 1.23% 6.46% 1.38%
Luxembourg 58.63 Aaa 0.00% 5.08% 0.00%
Macao 44.80 Aa3 0.62% 5.78% 0.70%
Macedonia 10.90 Ba3 3.69% 9.23% 4.15%
Madagascar 10.00 NA 5.64% 11.42% 6.34%
Malawi 5.43 NA 7.69% 13.73% 8.65%
Malaysia 296.54 A3 1.23% 6.46% 1.38%
Mali 14.03 NA 7.69% 13.73% 8.65%
Malta 11.00 A3 1.23% 6.46% 1.38%
Mauritius 12.17 Baa1 1.64% 6.92% 1.84%
Mexico 1046.92 A3 1.23% 6.46% 1.38%
Moldova 6.75 B3 6.67% 12.58% 7.50%
Mongolia 11.18 Caa1 7.69% 13.72% 8.64%
Montenegro 4.37 B1 4.62% 10.27% 5.19%
Montserrat 1.50 Baa3 2.26% 7.62% 2.54%
Morocco 103.61 Ba1 2.56% 7.96% 2.88%
Mozambique 11.01 Caa3 10.25% 16.60% 11.52%
Myanmar 63.23 NA 6.67% 12.58% 7.50%
Namibia 10.95 Ba1 2.56% 7.96% 2.88%
Netherlands 777.23 Aaa 0.00% 5.08% 0.00%
Netherlands Antilles NA NA 5.61% 11.39% 6.31%
New Zealand 184.97 Aaa 0.00% 5.08% 0.00%
Nicaragua 13.23 B2 5.64% 11.42% 6.34%
Niger 7.53 NA 12.30% 18.91% 13.83%
Nigeria 404.65 B2 5.64% 11.42% 6.34%
Norway 371.08 Aaa 0.00% 5.08% 0.00%
Oman 66.29 Baa2 1.95% 7.27% 2.19%
Pakistan 278.91 B3 6.67% 12.58% 7.50%
Palestinian Authority NA NA 1.43% 6.69% 1.61%
Panama 55.19 Baa2 1.95% 7.27% 2.19%
Papua New Guinea 20.21 B2 5.64% 11.42% 6.34%
Paraguay 27.42 Ba1 2.56% 7.96% 2.88%
Peru 192.21 A3 1.23% 6.46% 1.38%
Philippines 304.91 Baa2 1.95% 7.27% 2.19%
Poland 471.36 A2 0.87% 6.06% 0.98%
Portugal 204.84 Ba1 2.56% 7.96% 2.88%
Qatar 152.45 Aa3 0.62% 5.78% 0.70%
Ras Al Khaimah (Emirate of) 5.20 A2 0.87% 6.06% 0.98%
Reunion NA NA 4.86% 10.47% 5.46%
Romania 187.59 Baa3 2.26% 7.62% 2.54%
Russia 1283.16 Ba1 2.56% 7.96% 2.88%
Rwanda 8.38 B2 5.64% 11.42% 6.34%
Saint Lucia 1.67 NA 5.61% 11.39% 6.31%
Saudi Arabia 646.44 A1 0.72% 5.89% 0.81%
Senegal 14.68 Ba3 3.69% 9.23% 4.15%
Serbia 38.30 Ba3 3.69% 9.23% 4.15%
Sharjah 5.00 A3 1.23% 6.46% 1.38%
Sierra Leone 3.74 NA 12.30% 18.91% 13.83%
Singapore 296.98 Aaa 0.00% 5.08% 0.00%
Slovakia 89.77 A2 0.87% 6.06% 0.98%
Slovenia 44.71 Baa1 1.64% 6.92% 1.84%
Solomon Islands 1.20 NA 1.06% 6.27% 1.19%
Somalia 6.22 NA 12.30% 18.91% 13.83%
South Africa 295.46 Baa3 2.26% 7.62% 2.54%
Spain 1237.26 Baa2 1.95% 7.27% 2.19%
Sri Lanka 81.32 B1 4.62% 10.27% 5.19%
St. Maarten 1.50 Baa2 1.95% 7.27% 2.19%
St. Vincent & the Grenadines 0.77 B3 6.67% 12.58% 7.50%
Sudan 95.58 NA 18.00% 25.32% 20.24%
Suriname 3.28 B1 4.62% 10.27% 5.19%
Swaziland 3.72 B2 0.00% 5.08% 0.00%
Sweden 514.46 Aaa 0.00% 5.08% 0.00%
Switzerland 668.85 Aaa 0.00% 5.08% 0.00%
Syria NA NA 18.00% 25.32% 20.24%
Taiwan 970.90 Aa3 0.62% 5.78% 0.70%
Tajikistan 6.95 B3 2.56% 7.96% 2.88%
Tanzania 47.34 NA 6.67% 12.58% 7.50%
Thailand 407.03 Baa1 1.64% 6.92% 1.84%
Togo 4.40 NA 7.69% 13.73% 8.65%
Trinidad and Tobago 21.89 Ba1 2.56% 7.96% 2.88%
Tunisia 42.06 B1 4.62% 10.27% 5.19%
Turkey 863.71 Ba1 2.56% 7.96% 2.88%
Turks and Caicos Islands 1.50 Baa1 1.64% 6.92% 1.84%
Uganda 24.08 B2 5.64% 11.42% 6.34%
Ukraine 93.27 Caa2 9.23% 15.46% 10.38%
United Arab Emirates 348.74 Aa2 0.51% 5.65% 0.57%
United Kingdom 2647.90 Aa2 0.51% 5.65% 0.57%
United States 18624.48 Aaa 0.00% 5.08% 0.00%
Uruguay 52.42 Baa2 1.95% 7.27% 2.19%
Venezuela 250.00 Caa3 10.25% 16.60% 11.52%
Vietnam 205.28 B1 4.62% 10.27% 5.19%
Yemen, Republic 27.32 NA 18.00% 25.32% 20.24%
Zambia 21.06 B3 6.67% 12.58% 7.50%
Zimbabwe 16.62 NA 9.23% 15.46% 10.38%

 


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 2018

Aswath Damodaran