Template:Country default spreads and risk premiums
Last updated: January 5, 2022
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 additional 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:
- 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.
- 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). Since government bonds are not available or traded in most countries, I approximate the relative equity market volatility by estimating the standard deviations in two indices, the S&P emerging market equity index (for equities) and the S&P emerging market government bond index (for government bonds), and using that ratio for all countries to estimate the additional country risk premium. Finally, I add that country risk premium to my estimate of a mature market equity risk premium, for which I use the implied equity ris premium of the S&P 500.
| Country | Moody's rating | Adj. Default Spread | Country Risk Premium | Equity Risk Premium | Country Risk Premium |
|---|---|---|---|---|---|
| Abu Dhabi | Aa2 | 0.42% | 0.49% | 4.73% | 0.49% |
| Albania | B1 | 3.83% | 4.45% | 8.69% | 4.45% |
| Algeria | NR | 5.53% | 6.43% | 10.67% | 6.43% |
| Andorra (Principality of) | Baa2 | 1.62% | 1.88% | 6.12% | 1.88% |
| Angola | B3 | 5.53% | 6.43% | 10.67% | 6.43% |
| Anguilla | NR | 5.88% | 6.83% | 11.07% | 6.83% |
| Antigua & Barbuda | NR | 5.88% | 6.83% | 11.07% | 6.83% |
| Argentina | Ca | 10.21% | 11.87% | 16.11% | 11.87% |
| Armenia | Ba3 | 3.06% | 3.56% | 7.80% | 3.56% |
| Aruba | Baa2 | 1.62% | 1.88% | 6.12% | 1.88% |
| Australia | Aaa | 0.00% | 0.00% | 4.24% | 0.00% |
| Austria | Aa1 | 0.34% | 0.39% | 4.63% | 0.39% |
| Azerbaijan | Ba2 | 2.56% | 2.97% | 7.21% | 2.97% |
| Bahamas | Ba3 | 3.06% | 3.56% | 7.80% | 3.56% |
| Bahrain | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| Bangladesh | Ba3 | 3.06% | 3.56% | 7.80% | 3.56% |
| Barbados | Caa1 | 6.38% | 7.41% | 11.65% | 7.41% |
| Belarus | B3 | 5.53% | 6.43% | 10.67% | 6.43% |
| Belgium | Aa3 | 0.51% | 0.60% | 4.84% | 0.60% |
| Belize | Caa3 | 8.51% | 9.89% | 14.13% | 9.89% |
| Benin | B1 | 3.83% | 4.45% | 8.69% | 4.45% |
| Bermuda | A2 | 0.72% | 0.84% | 5.08% | 0.84% |
| Bolivia | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| Bosnia and Herzegovina | B3 | 5.53% | 6.43% | 10.67% | 6.43% |
| Botswana | A3 | 1.02% | 1.19% | 5.43% | 1.19% |
| Brazil | Ba2 | 2.56% | 2.97% | 7.21% | 2.97% |
| British Virgin Islands | NR | 5.88% | 6.83% | 11.07% | 6.83% |
| Brunei | NR | 0.72% | 0.84% | 5.08% | 0.84% |
| Bulgaria | Baa1 | 1.36% | 1.58% | 5.82% | 1.58% |
| Burkina Faso | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| Cambodia | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| Cameroon | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| Canada | Aaa | 0.00% | 0.00% | 4.24% | 0.00% |
| Cape Verde | B3 | 5.53% | 6.43% | 10.67% | 6.43% |
| Cayman Islands | Aa3 | 0.51% | 0.60% | 4.84% | 0.60% |
| Channel Islands | NR | 0.72% | 0.83% | 5.07% | 0.83% |
| Chile | A1 | 0.60% | 0.70% | 4.94% | 0.70% |
| China | A1 | 0.60% | 0.70% | 4.94% | 0.70% |
| Colombia | Baa2 | 1.62% | 1.88% | 6.12% | 1.88% |
| Congo (Democratic Republic | Caa1 | 6.38% | 7.41% | 11.65% | 7.41% |
| Congo (Republic of) | Caa2 | 7.66% | 8.90% | 13.14% | 8.90% |
| Cook Islands | B1 | 3.83% | 4.45% | 8.69% | 4.45% |
| Costa Rica | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| Croatia | Ba1 | 2.13% | 2.47% | 6.71% | 2.47% |
| Cuba | Ca | 10.21% | 11.87% | 16.11% | 11.87% |
| Curacao | Baa2 | 1.62% | 1.88% | 6.12% | 1.88% |
| Cyprus | Ba1 | 2.13% | 2.47% | 6.71% | 2.47% |
| Czech Republic | Aa3 | 0.51% | 0.60% | 4.84% | 0.60% |
| Denmark | Aaa | 0.00% | 0.00% | 4.24% | 0.00% |
| Dominican Republic | Ba3 | 3.06% | 3.56% | 7.80% | 3.56% |
| Ecuador | Caa3 | 8.51% | 9.89% | 14.13% | 9.89% |
| Egypt | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| El Salvador | Caa1 | 6.38% | 7.41% | 11.65% | 7.41% |
| Estonia | A1 | 0.60% | 0.70% | 4.94% | 0.70% |
| Ethiopia | Caa2 | 7.66% | 8.90% | 13.14% | 8.90% |
| Falkland Islands | NR | 5.88% | 6.83% | 11.07% | 6.83% |
| Fiji | B1 | 3.83% | 4.45% | 8.69% | 4.45% |
| Finland | Aa1 | 0.34% | 0.39% | 4.63% | 0.39% |
| France | Aa2 | 0.42% | 0.49% | 4.73% | 0.49% |
| French Guiana | NR | 3.26% | 3.79% | 8.03% | 3.79% |
| Gabon | Caa1 | 6.38% | 7.41% | 11.65% | 7.41% |
| Gambia | NR | 4.68% | 5.44% | 9.68% | 5.44% |
| Georgia | Ba2 | 2.56% | 2.97% | 7.21% | 2.97% |
| Germany | Aaa | 0.00% | 0.00% | 4.24% | 0.00% |
| Ghana | B3 | 5.53% | 6.43% | 10.67% | 6.43% |
| Gibraltar | NR | 0.72% | 0.83% | 5.07% | 0.83% |
| Greece | Ba3 | 3.06% | 3.56% | 7.80% | 3.56% |
| Greenland | NR | 0.72% | 0.83% | 5.07% | 0.83% |
| Guatemala | Ba1 | 2.13% | 2.47% | 6.71% | 2.47% |
| Guernsey | Aa3 | 0.51% | 0.60% | 4.84% | 0.60% |
| Guinea | NR | 7.66% | 8.90% | 13.14% | 8.90% |
| Guinea-Bissau | NR | 5.53% | 6.43% | 10.67% | 6.43% |
| Guyana | NR | 3.83% | 4.45% | 8.69% | 4.45% |
| Haiti | NR | 8.51% | 9.89% | 14.13% | 9.89% |
| Honduras | B1 | 3.83% | 4.45% | 8.69% | 4.45% |
| Hong Kong | Aa3 | 0.51% | 0.60% | 4.84% | 0.60% |
| Hungary | Baa2 | 1.62% | 1.88% | 6.12% | 1.88% |
| Iceland | A2 | 0.72% | 0.84% | 5.08% | 0.84% |
| India | Baa3 | 1.87% | 2.18% | 6.42% | 2.18% |
| Indonesia | Baa2 | 1.62% | 1.88% | 6.12% | 1.88% |
| Iran | NR | 5.53% | 6.43% | 10.67% | 6.43% |
| Iraq | Caa1 | 6.38% | 7.41% | 11.65% | 7.41% |
| Ireland | A2 | 0.72% | 0.84% | 5.08% | 0.84% |
| Isle of Man | Aa3 | 0.51% | 0.60% | 4.84% | 0.60% |
| Israel | A1 | 0.60% | 0.70% | 4.94% | 0.70% |
| Italy | Baa3 | 1.87% | 2.18% | 6.42% | 2.18% |
| Ivory Coast | Ba3 | 3.06% | 3.56% | 7.80% | 3.56% |
| Jamaica | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| Japan | A1 | 0.60% | 0.70% | 4.94% | 0.70% |
| Jersey | Aaa | 0.00% | 0.00% | 4.24% | 0.00% |
| Jordan | B1 | 3.83% | 4.45% | 8.69% | 4.45% |
| Kazakhstan | Baa2 | 1.62% | 1.88% | 6.12% | 1.88% |
| Kenya | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| Korea, D.P.R. | NR | 10.21% | 11.87% | 16.11% | 11.87% |
| Kuwait | A1 | 0.60% | 0.70% | 4.94% | 0.70% |
| Kyrgyzstan | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| Laos | Caa2 | 7.66% | 8.90% | 13.14% | 8.90% |
| Latvia | A3 | 1.02% | 1.19% | 5.43% | 1.19% |
| Lebanon | C | 17.50% | 20.34% | 24.58% | 20.34% |
| Liberia | NR | 7.66% | 8.90% | 13.14% | 8.90% |
| Libya | NR | 3.83% | 4.45% | 8.69% | 4.45% |
| Liechtenstein | Aaa | 0.00% | 0.00% | 4.24% | 0.00% |
| Lithuania | A2 | 0.72% | 0.84% | 5.08% | 0.84% |
| Luxembourg | Aaa | 0.00% | 0.00% | 4.24% | 0.00% |
| Macao | Aa3 | 0.51% | 0.60% | 4.84% | 0.60% |
| Macedonia | Ba3 | 3.06% | 3.56% | 7.80% | 3.56% |
| Madagascar | NR | 5.53% | 6.43% | 10.67% | 6.43% |
| Malawi | NR | 7.66% | 8.90% | 13.14% | 8.90% |
| Malaysia | A3 | 1.02% | 1.19% | 5.43% | 1.19% |
| Maldives | Caa1 | 6.38% | 7.41% | 11.65% | 7.41% |
| Mali | Caa1 | 6.38% | 7.41% | 11.65% | 7.41% |
| Malta | A2 | 0.72% | 0.84% | 5.08% | 0.84% |
| Martinique | NR | 3.26% | 3.79% | 8.03% | 3.79% |
| Mauritius | Baa2 | 1.62% | 1.88% | 6.12% | 1.88% |
| Mexico | Baa1 | 1.36% | 1.58% | 5.82% | 1.58% |
| Moldova | B3 | 5.53% | 6.43% | 10.67% | 6.43% |
| Mongolia | B3 | 5.53% | 6.43% | 10.67% | 6.43% |
| Montenegro | B1 | 3.83% | 4.45% | 8.69% | 4.45% |
| Montserrat | Baa3 | 1.87% | 2.18% | 6.42% | 2.18% |
| Morocco | Ba1 | 2.13% | 2.47% | 6.71% | 2.47% |
| Mozambique | Caa2 | 7.66% | 8.90% | 13.14% | 8.90% |
| Myanmar | NR | 10.21% | 11.87% | 16.11% | 11.87% |
| Namibia | Ba3 | 3.06% | 3.56% | 7.80% | 3.56% |
| Netherlands | Aaa | 0.00% | 0.00% | 4.24% | 0.00% |
| Netherlands Antilles | NR | 5.88% | 6.83% | 11.07% | 6.83% |
| New Zealand | Aaa | 0.00% | 0.00% | 4.24% | 0.00% |
| Nicaragua | B3 | 5.53% | 6.43% | 10.67% | 6.43% |
| Niger | B3 | 5.53% | 6.43% | 10.67% | 6.43% |
| Nigeria | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| Norway | Aaa | 0.00% | 0.00% | 4.24% | 0.00% |
| Oman | Ba3 | 3.06% | 3.56% | 7.80% | 3.56% |
| Pakistan | B3 | 5.53% | 6.43% | 10.67% | 6.43% |
| Palestinian Authority | NR | 1.38% | 1.60% | 5.84% | 1.60% |
| Panama | Baa2 | 1.62% | 1.88% | 6.12% | 1.88% |
| Papua New Guinea | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| Paraguay | Ba1 | 2.13% | 2.47% | 6.71% | 2.47% |
| Peru | Baa1 | 1.36% | 1.58% | 5.82% | 1.58% |
| Philippines | Baa2 | 1.62% | 1.88% | 6.12% | 1.88% |
| Poland | A2 | 0.72% | 0.84% | 5.08% | 0.84% |
| Portugal | Baa2 | 1.62% | 1.88% | 6.12% | 1.88% |
| Qatar | Aa3 | 0.51% | 0.60% | 4.84% | 0.60% |
| Ras Al Khaimah (Emirate of) | A3 | 1.02% | 1.19% | 5.43% | 1.19% |
| Reunion | NR | 4.51% | 5.25% | 9.49% | 5.25% |
| Romania | Baa3 | 1.87% | 2.18% | 6.42% | 2.18% |
| Russia | Baa3 | 1.87% | 2.18% | 6.42% | 2.18% |
| Rwanda | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| Saint Lucia | NR | 5.88% | 6.83% | 11.07% | 6.83% |
| Saudi Arabia | A1 | 0.60% | 0.70% | 4.94% | 0.70% |
| Senegal | Ba3 | 3.06% | 3.56% | 7.80% | 3.56% |
| Serbia | Ba2 | 2.56% | 2.97% | 7.21% | 2.97% |
| Sharjah | Baa3 | 1.87% | 2.18% | 6.42% | 2.18% |
| Sierra Leone | NR | 8.51% | 9.89% | 14.13% | 9.89% |
| Singapore | Aaa | 0.00% | 0.00% | 4.24% | 0.00% |
| Slovakia | A2 | 0.72% | 0.84% | 5.08% | 0.84% |
| Slovenia | A3 | 1.02% | 1.19% | 5.43% | 1.19% |
| Solomon Islands | Caa1 | 6.38% | 7.41% | 11.65% | 7.41% |
| Somalia | NR | 10.21% | 11.87% | 16.11% | 11.87% |
| South Africa | Ba2 | 2.56% | 2.97% | 7.21% | 2.97% |
| South Korea | Aa2 | 0.42% | 0.49% | 4.73% | 0.49% |
| Spain | Baa1 | 1.36% | 1.58% | 5.82% | 1.58% |
| Sri Lanka | Caa2 | 7.66% | 8.90% | 13.14% | 8.90% |
| St. Maarten | Ba2 | 2.56% | 2.97% | 7.21% | 2.97% |
| St. Vincent & the Grenadines | B3 | 5.53% | 6.43% | 10.67% | 6.43% |
| Sudan | NR | 17.50% | 20.34% | 24.58% | 20.34% |
| Suriname | Caa3 | 8.51% | 9.89% | 14.13% | 9.89% |
| Swaziland | B3 | 5.53% | 6.43% | 10.67% | 6.43% |
| Sweden | Aaa | 0.00% | 0.00% | 4.24% | 0.00% |
| Switzerland | Aaa | 0.00% | 0.00% | 4.24% | 0.00% |
| Syria | NR | 17.50% | 20.34% | 24.58% | 20.34% |
| Taiwan | Aa3 | 0.51% | 0.60% | 4.84% | 0.60% |
| Tajikistan | B3 | 5.53% | 6.43% | 10.67% | 6.43% |
| Tanzania | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| Thailand | Baa1 | 1.36% | 1.58% | 5.82% | 1.58% |
| Togo | B3 | 5.53% | 6.43% | 10.67% | 6.43% |
| Trinidad and Tobago | Ba2 | 2.56% | 2.97% | 7.21% | 2.97% |
| Tunisia | Caa1 | 6.38% | 7.41% | 11.65% | 7.41% |
| Turkey | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| Turks and Caicos Islands | Baa1 | 1.36% | 1.58% | 5.82% | 1.58% |
| Uganda | B2 | 4.68% | 5.44% | 9.68% | 5.44% |
| Ukraine | B3 | 5.53% | 6.43% | 10.67% | 6.43% |
| United Arab Emirates | Aa2 | 0.42% | 0.49% | 4.73% | 0.49% |
| United Kingdom | Aa3 | 0.51% | 0.60% | 4.84% | 0.60% |
| United States | Aaa | 0.00% | 0.00% | 4.24% | 0.00% |
| Uruguay | Baa2 | 1.62% | 1.88% | 6.12% | 1.88% |
| Uzbekistan | B1 | 3.83% | 4.45% | 8.69% | 4.45% |
| Venezuela | C | 17.50% | 20.34% | 24.58% | 20.34% |
| Vietnam | Ba3 | 3.06% | 3.56% | 7.80% | 3.56% |
| Yemen | NR | 10.21% | 11.87% | 16.11% | 11.87% |
| Zambia | Ca | 10.21% | 11.87% | 16.11% | 11.87% |
| Zimbabwe | NR | 6.38% | 7.41% | 11.65% | 7.41% |
For more details, download the excel spreadsheet that contains this data on my website: https://www.stern.nyu.edu/~adamodar/pc/datasets/ctryprem.xlsx
If you are interested in my approach to computing the equity risk premium, download my magnum opus (just kidding):
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3825823
And my paper on measuring country risk
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3879109
Last updated: January 2022
Aswath Damodaran