Georgia's Country Risk Premium and Total Equity Risk Premium: A Damodaran-Based Assessment and Regional Benchmarking

This note provides a compact, policy-relevant assessment of Georgia’s sovereign-embedded equity risk premium using the country risk premium (CRP) framework popularized by Aswath Damodaran. Using the January 1, 2026, update of the publicly available 'Country Default Spreads and Risk Premiums' dataset (ctryprem), Georgia is assigned a Moody’s rating of Ba2 (with S&P BB and Fitch BB), which maps into a rating-based sovereign default spread of 2.557% (about 256 bps). Damodaran’s approach adjusts this spread by a relative equity volatility multiplier (λ = 1.523378), yielding a country risk premium of 3.895% (about 390 bps). Adding this country component to the mature-market equity risk premium of 4.23% produces a total equity risk premium (Total ERP) for Georgia of 8.125% (about 813 bps). A regional benchmark exercise indicates that Georgia’s CRP and default-spread inputs sit modestly above the GDP-weighted average for the 'Eastern Europe & Russia' group in the same dataset, while Georgia’s corporate tax rate (15%) is below the group’s weighted average. In comparative terms, Georgia’s risk positioning lies between Azerbaijan (lower CRP/Total ERP) and Armenia (higher CRP/Total ERP), with Turkey higher and Ukraine materially higher. These results are immediately actionable for cost-of-equity and discount-rate calibration in project appraisal, PPP valuation, and sovereign-linked investment screening, while remaining transparent about the model nature of the estimates and the distinction between ratings-based spreads and market-quoted CDS at any point in time.