Last updated: January 2012
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 risk premium, I start with the country 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. This becomes a measure of the added country risk premium for that country. I add this default spread to the historical risk premium for a mature equity market (estimated from US historical data) to estimate the total risk premium. 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 1.5 (equity markets are about 1.5 times more volatile than bond markets) to estimate country risk premium.I have added this to my estimated risk premium of 6% for mature markets (obtained by looking at the implied premium for the S&P 500) to get the total risk premium.
| Country | Region |
Local Currency Rating |
Adj. Default Spread |
Total Risk Premium |
Country Risk Premium |
| Albania | Eastern Europe &
Russia |
B1 |
400 |
12.00% |
6.00% |
| Angola | Africa |
Ba3 |
325 |
10.88% |
4.88% |
| Argentina | Central and South
America |
B3 |
600 |
15.00% |
9.00% |
| Armenia | Eastern Europe &
Russia |
Ba2 |
275 |
10.13% |
4.13% |
| Australia | Australia & New
Zealand |
Aaa |
0 |
6.00% |
0.00% |
| Austria [1] | Western Europe |
Aaa |
0 |
6.00% |
0.00% |
| Azerbaijan | Eastern Europe &
Russia |
Ba1 |
240 |
9.60% |
3.60% |
| Bahamas | Caribbean |
A3 |
115 |
7.73% |
1.73% |
| Bahrain | Middle East |
Baa1 |
150 |
8.25% |
2.25% |
| Bangladesh | Asia |
Ba3 |
325 |
10.88% |
4.88% |
| Barbados | Caribbean |
Baa3 |
200 |
9.00% |
3.00% |
| Belarus | Eastern Europe &
Russia |
B3 |
600 |
15.00% |
9.00% |
| Belgium [1] | Western Europe |
Aa3 |
70 |
7.05% |
1.05% |
| Belize | Central and South
America |
B3 |
600 |
15.00% |
9.00% |
| Bermuda | Caribbean |
Aa2 |
50 |
6.75% |
0.75% |
| Bolivia | Central and South
America |
B1 |
400 |
12.00% |
6.00% |
| Bosnia and Herzegovina | Eastern Europe &
Russia |
B2 |
500 |
13.50% |
7.50% |
| Botswana | Africa |
A2 |
100 |
7.50% |
1.50% |
| Brazil | Central and South
America |
Baa2 |
175 |
8.63% |
2.63% |
| Bulgaria | Eastern Europe &
Russia |
Baa2 |
175 |
8.63% |
2.63% |
| Cambodia | Asia |
B2 |
500 |
13.50% |
7.50% |
| Canada | North America |
Aaa |
0 |
6.00% |
0.00% |
| Cayman Islands | Caribbean |
Aa3 |
70 |
7.05% |
1.05% |
| Chile | Central and South
America |
Aa3 |
70 |
7.05% |
1.05% |
| China | Asia |
Aa3 |
70 |
7.05% |
1.05% |
| Colombia | Central and South
America |
Baa3 |
200 |
9.00% |
3.00% |
| Costa Rica | Central and South
America |
Baa3 |
200 |
9.00% |
3.00% |
| Croatia | Eastern Europe &
Russia |
Baa3 |
200 |
9.00% |
3.00% |
| Cuba | Caribbean |
Caa1 |
700 |
16.50% |
10.50% |
| Cyprus [1] | Western Europe |
Baa3 |
200 |
9.00% |
3.00% |
| Czech Republic | Eastern Europe &
Russia |
A1 |
85 |
7.28% |
1.28% |
| Denmark | Western Europe |
Aaa |
0 |
6.00% |
0.00% |
| Dominican Republic | Caribbean |
B1 |
400 |
12.00% |
6.00% |
| Ecuador | Central and South
America |
Caa2 |
850 |
18.75% |
12.75% |
| Egypt | Africa |
B2 |
500 |
13.50% |
7.50% |
| El Salvador | Central and South
America |
Ba2 |
275 |
10.13% |
4.13% |
| Estonia | Eastern Europe &
Russia |
A1 |
85 |
7.28% |
1.28% |
| Fiji Islands | Asia |
B1 |
400 |
12.00% |
6.00% |
| Finland [1] | Western Europe |
Aaa |
0 |
6.00% |
0.00% |
| France [1] | Western Europe |
Aaa |
0 |
6.00% |
0.00% |
| Georgia | Eastern Europe &
Russia |
Ba3 |
325 |
10.88% |
4.88% |
| Germany [1] | Western Europe |
Aaa |
0 |
6.00% |
0.00% |
| Greece [1] | Western Europe |
Caa1 |
700 |
16.50% |
10.50% |
| Guatemala | Central and South
America |
Ba1 |
240 |
9.60% |
3.60% |
| Honduras | Central and South
America |
B2 |
500 |
13.50% |
7.50% |
| Hong Kong | Asia |
Aa1 |
25 |
6.38% |
0.38% |
| Hungary | Eastern Europe &
Russia |
Ba1 |
240 |
9.60% |
3.60% |
| Iceland | Western Europe |
Baa3 |
200 |
9.00% |
3.00% |
| India | Asia |
Baa3 |
200 |
9.00% |
3.00% |
| Indonesia | Asia |
Ba1 |
240 |
9.60% |
3.60% |
| Ireland [1] | Western Europe |
Ba1 |
240 |
9.60% |
3.60% |
| Isle of Man | Financial Center |
Aaa |
0 |
6.00% |
0.00% |
| Israel | Middle East |
A1 |
85 |
7.28% |
1.28% |
| Italy [1] | Western Europe |
A2 |
100 |
7.50% |
1.50% |
| Jamaica | Caribbean |
B3 |
600 |
15.00% |
9.00% |
| Japan | Asia |
Aa3 |
70 |
7.05% |
1.05% |
| Jordan | Middle East |
Ba2 |
275 |
10.13% |
4.13% |
| Kazakhstan | Eastern Europe &
Russia |
Baa2 |
175 |
8.63% |
2.63% |
| Korea | Asia |
A1 |
85 |
7.28% |
1.28% |
| Kuwait | Middle East |
Aa2 |
50 |
6.75% |
0.75% |
| Latvia | Eastern Europe &
Russia |
Baa3 |
200 |
9.00% |
3.00% |
| Lebanon | Middle East |
B1 |
400 |
12.00% |
6.00% |
| Lithuania | Eastern Europe &
Russia |
Baa1 |
150 |
8.25% |
2.25% |
| Luxembourg [1] | Financial Center |
Aaa |
0 |
6.00% |
0.00% |
| Macao | Asia |
Aa3 |
70 |
7.05% |
1.05% |
| Malaysia | Asia |
A3 |
115 |
7.73% |
1.73% |
| Malta [1] | Western Europe |
A2 |
100 |
7.50% |
1.50% |
| Mauritius | Africa |
Baa2 |
175 |
8.63% |
2.63% |
| Mexico | Central and South
America |
Baa1 |
150 |
8.25% |
2.25% |
| Moldova | Eastern Europe &
Russia |
B3 |
600 |
15.00% |
9.00% |
| Mongolia | Asia |
B1 |
400 |
12.00% |
6.00% |
| Montenegro | Eastern Europe &
Russia |
Ba3 |
325 |
10.88% |
4.88% |
| Morocco | Africa |
Ba1 |
240 |
9.60% |
3.60% |
| Namibia | Africa |
Baa3 |
200 |
9.00% |
3.00% |
| Netherlands [1] | Western Europe |
Aaa |
0 |
6.00% |
0.00% |
| New Zealand | Australia & New
Zealand |
Aaa |
0 |
6.00% |
0.00% |
| Nicaragua | Central and South
America |
B3 |
600 |
15.00% |
9.00% |
| Norway | Western Europe |
Aaa |
0 |
6.00% |
0.00% |
| Oman | Middle East |
A1 |
85 |
7.28% |
1.28% |
| Pakistan | Asia |
B3 |
600 |
15.00% |
9.00% |
| Panama | Central and South
America |
Baa3 |
200 |
9.00% |
3.00% |
| Papua New Guinea | Asia |
B1 |
400 |
12.00% |
6.00% |
| Paraguay | Central and South
America |
B1 |
400 |
12.00% |
6.00% |
| Peru | Central and South
America |
Baa3 |
200 |
9.00% |
3.00% |
| Philippines | Asia |
Ba2 |
275 |
10.13% |
4.13% |
| Poland | Eastern Europe &
Russia |
A2 |
100 |
7.50% |
1.50% |
| Portugal [1] | Western Europe |
Ba2 |
275 |
10.13% |
4.13% |
| Qatar | Middle East |
Aa2 |
50 |
6.75% |
0.75% |
| Romania | Eastern Europe &
Russia |
Baa3 |
200 |
9.00% |
3.00% |
| Russia | Eastern Europe &
Russia |
Baa1 |
150 |
8.25% |
2.25% |
| Saudi Arabia | Middle East |
Aa3 |
70 |
7.05% |
1.05% |
| Senegal | Middle East |
B1 |
400 |
12.00% |
6.00% |
| Singapore | Asia |
Aaa |
0 |
6.00% |
0.00% |
| Slovakia | Eastern Europe &
Russia |
A1 |
85 |
7.28% |
1.28% |
| Slovenia [1] | Eastern Europe &
Russia |
A1 |
85 |
7.28% |
1.28% |
| South Africa | Africa |
A3 |
115 |
7.73% |
1.73% |
| Spain [1] | Western Europe |
A1 |
85 |
7.28% |
1.28% |
| Sri Lanka | Asia |
B1 |
400 |
12.00% |
6.00% |
| St. Vincent & the Grenadines | Caribbean |
B1 |
400 |
12.00% |
6.00% |
| Suriname | Caribbean |
Ba3 |
325 |
10.88% |
4.88% |
| Sweden | Western Europe |
Aaa |
0 |
6.00% |
0.00% |
| Switzerland | Western Europe |
Aaa |
0 |
6.00% |
0.00% |
| Taiwan | Asia |
Aa3 |
70 |
7.05% |
1.05% |
| Thailand | Asia |
Baa1 |
150 |
8.25% |
2.25% |
| Trinidad and Tobago | Caribbean |
Baa1 |
150 |
8.25% |
2.25% |
| Tunisia | Africa |
Baa3 |
200 |
9.00% |
3.00% |
| Turkey | Asia |
Ba2 |
275 |
10.13% |
4.13% |
| Ukraine | Eastern Europe &
Russia |
B2 |
500 |
13.50% |
7.50% |
| United Arab Emirates | Middle East |
Aa2 |
50 |
6.75% |
0.75% |
| United Kingdom | Western Europe |
Aaa |
0 |
6.00% |
0.00% |
| United States of America | North America |
Aaa |
0 |
6.00% |
0.00% |
| Uruguay | Central and South
America |
Ba1 |
240 |
9.60% |
3.60% |
| Venezuela | Central and South
America |
B1 |
400 |
12.00% |
6.00% |
| Vietnam | Asia |
B1 |
400 |
12.00% |
6.00% |
Last updated: January 2012
Aswath Damodaran