In Poland, the value of the Country Risk Premium is very low. Expert evaluation

The Country Risk Premium reflects how high the risks of acquiring real estate in a given country are in the current situation. According to current information, in Poland the Country Risk Premium has been at a fairly low level for many years.

The Polish economy has grown steadily over the past 32 years. This is a record

Poland, officially called the Republic of Poland (in Polish Rzeczpospolita Polska), is located in central Europe. It is bordered by the Baltic Sea. According to the World Bank, there were 37.75 million people in 2021.

After the country’s accession to the EU, the standard of living in Poland began to rise significantly. As of 2023, the Polish economy has grown steadily over the past 32 years, a record in the EU. Per capita GDP, at purchasing power parity, has grown at an average annual rate of 6% over the past 20 years, doubling the country’s GDP since 1990. As early as 2017, FTSE Group, a financial company that calculates stock indices, announced the results of an annual classification of markets, according to which it raised Poland’s economy from a developing market to a developed market. Poland was the first postcommunist country to achieve this status. The average resident spends up to 1,000 euros per month on everyday needs. Food prices are lower than in other EU countries. Food costs range from 25 to 40% of income. Compared to other EU countries, housing is relatively affordable.

The country is rich in history, monuments, diverse (from coasts, forests, rivers and lakes, to rocky mountains) nature and, above all, hospitality and friendliness of residents. Over ten million tourists visit Poland every year.

With its unique geographical climatic and political conditions, Poland is of great interest for the purchase of real estate by foreigners, especially residents of neighboring countries such as Ukraine, Germany, Lithuania, Belarus and Russia, as well as citizens of Latvia, with which Poland has no common border. Because of this, a special Polish law «On acquisition of real estate by foreigners» was adopted. Military events in neighboring countries strengthened these processes.

Country risk premium values for Poland

One indicator of a country’s investment attractiveness is the country risk premium (CRP), usually calculated on the basis of the yield of government securities on the world stock markets. The Government of the Republic of Poland issues a significant range of long-term government bonds with maturities of one to ten years (except nine years). These «Eurobonds» are successfully listed on all stock markets.

Since the purpose of the study is to assess the investment attractiveness of real estate, the longest-lived securities were chosen for the calculations, so that their life span was comparable to the economic life of real estate.

The calculations were based on the yield of the Government of the Republic of Poland bonds maturing in October 2033, denominated in US dollars. Data on the Polish country risk for the spring-summer period of this year are shown on the graph.

Country risk values vary around 3 per cent. There is a slight upward trend, possibly due to the parliamentary elections and the referendum of 15 October.As of 30 September 2023 for Poland

CRP = 3,45%.

This is a very low value of country risk, with little likelihood of real estate value loss (total or partial) as a result of general economic, financial and socio-political factors, present in this country regardless of the property.